Investors interested in stocks from the Computer- Storage Devices sector have probably already heard of Western Digital (WDC) and Pure Storage (PSTG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Western Digital has a Zacks Rank of #1 (Strong Buy), while Pure Storage has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that WDC likely has seen a stronger improvement to its earnings outlook than PSTG has recently. But this is just one factor that value investors are interested in.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
WDC currently has a forward P/E ratio of 11.67, while PSTG has a forward P/E of 31.47. We also note that WDC has a PEG ratio of 0.85. 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. PSTG currently has a PEG ratio of 1.69.
Another notable valuation metric for WDC is its P/B ratio of 4.98. 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, PSTG has a P/B of 14.99.
These are just a few of the metrics contributing to WDC's Value grade of B and PSTG's Value grade of F.
WDC sticks out from PSTG in both our Zacks Rank and Style Scores models, so value investors will likely feel that WDC is the better option right now.
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Western Digital Corporation (WDC): Free Stock Analysis Report Pure Storage, Inc. (PSTG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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