PAGS or FOUR: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Financial Transaction Services sector have probably already heard of PagSeguro Digital Ltd. (PAGS) and Shift4 Payments (FOUR). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Currently, PagSeguro Digital Ltd. has a Zacks Rank of #2 (Buy), while Shift4 Payments 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 PAGS 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 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 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.

PAGS currently has a forward P/E ratio of 6.60, while FOUR has a forward P/E of 14.79. We also note that PAGS has a PEG ratio of 0.58. 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. FOUR currently has a PEG ratio of 0.66.

Another notable valuation metric for PAGS is its P/B ratio of 1.1. 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, FOUR has a P/B of 7.11.

These are just a few of the metrics contributing to PAGS's Value grade of A and FOUR's Value grade of C.

PAGS stands above FOUR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PAGS is the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research