Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either XP Inc.A (XP) or SoFi Technologies, Inc. (SOFI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
XP Inc.A and SoFi Technologies, Inc. are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that XP has an improving earnings outlook. But this is only part of the picture 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
XP currently has a forward P/E ratio of 9.66, while SOFI has a forward P/E of 76.81. We also note that XP has a PEG ratio of 0.72. 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. SOFI currently has a PEG ratio of 3.58.
Another notable valuation metric for XP is its P/B ratio of 2.48. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SOFI has a P/B of 3.5.
These metrics, and several others, help XP earn a Value grade of B, while SOFI has been given a Value grade of F.
XP sticks out from SOFI in both our Zacks Rank and Style Scores models, so value investors will likely feel that XP is the better option right now.
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XP Inc. (XP): Free Stock Analysis Report SoFi Technologies, Inc. (SOFI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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