Investors interested in stocks from the Technology Services sector have probably already heard of Kyndryl Holdings, Inc. (KD) and AppLovin (APP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Kyndryl Holdings, Inc. and AppLovin are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KD is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
KD currently has a forward P/E ratio of 17.78, while APP has a forward P/E of 44.28. We also note that KD has a PEG ratio of 0.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. APP currently has a PEG ratio of 2.21.
Another notable valuation metric for KD is its P/B ratio of 6.9. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, APP has a P/B of 218.13.
Based on these metrics and many more, KD holds a Value grade of A, while APP has a Value grade of D.
KD has seen stronger estimate revision activity and sports more attractive valuation metrics than APP, so it seems like value investors will conclude that KD is the superior option right now.
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Kyndryl Holdings, Inc. (KD): Free Stock Analysis Report AppLovin Corporation (APP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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