GTM or SPOT: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Internet - Software sector have probably already heard of ZoomInfo (GTM) and Spotify (SPOT). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, ZoomInfo has a Zacks Rank of #2 (Buy), while Spotify has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GTM is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

GTM currently has a forward P/E ratio of 10.39, while SPOT has a forward P/E of 116.31. We also note that GTM has a PEG ratio of 1.47. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SPOT currently has a PEG ratio of 2.89.

Another notable valuation metric for GTM is its P/B ratio of 2.16. 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, SPOT has a P/B of 18.15.

These are just a few of the metrics contributing to GTM's Value grade of B and SPOT's Value grade of F.

GTM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GTM is likely the superior value option right now.

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

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