Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both XP Inc.A (XP) and 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 has a Zacks Rank of #1 (Strong Buy), while SoFi Technologies, Inc. has a Zacks Rank of #2 (Buy) 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. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
XP currently has a forward P/E ratio of 10.16, while SOFI has a forward P/E of 76.08. We also note that XP has a PEG ratio of 0.76. 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. SOFI currently has a PEG ratio of 3.00.
Another notable valuation metric for XP is its P/B ratio of 2.61. 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, SOFI has a P/B of 3.81.
Based on these metrics and many more, XP holds a Value grade of B, while SOFI has a Value grade of F.
XP has seen stronger estimate revision activity and sports more attractive valuation metrics than SOFI, so it seems like value investors will conclude that XP is the superior 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
XP Inc. (XP): Free Stock Analysis Report SoFi Technologies, Inc. (SOFI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
