Investors with an interest in Financial Transaction Services stocks have likely encountered both Paypal (PYPL) and MasterCard (MA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Paypal has a Zacks Rank of #2 (Buy), while MasterCard has a Zacks Rank of #3 (Hold). This means that PYPL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
PYPL currently has a forward P/E ratio of 12.93, while MA has a forward P/E of 36.29. We also note that PYPL has a PEG ratio of 1.04. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MA currently has a PEG ratio of 2.43.
Another notable valuation metric for PYPL is its P/B ratio of 3.19. 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, MA has a P/B of 67.96.
These are just a few of the metrics contributing to PYPL's Value grade of A and MA's Value grade of D.
PYPL has seen stronger estimate revision activity and sports more attractive valuation metrics than MA, so it seems like value investors will conclude that PYPL is the superior option right now.
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PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Mastercard Incorporated (MA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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