WEX or V: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Financial Transaction Services sector have probably already heard of Wex (WEX) and Visa (V). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Wex and Visa are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

WEX currently has a forward P/E ratio of 10.18, while V has a forward P/E of 30.70. We also note that WEX has a PEG ratio of 2.07. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. V currently has a PEG ratio of 2.36.

Another notable valuation metric for WEX is its P/B ratio of 6.47. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, V has a P/B of 17.34.

Based on these metrics and many more, WEX holds a Value grade of B, while V has a Value grade of D.

Both WEX and V are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WEX is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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