WEX or V: Which Is the Better Value Stock Right Now?

Investors interested in Financial Transaction Services stocks are likely familiar with Wex (WEX) and Visa (V). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Wex has a Zacks Rank of #2 (Buy), while Visa has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WEX is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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 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.

WEX currently has a forward P/E ratio of 10.85, while V has a forward P/E of 29.58. We also note that WEX has a PEG ratio of 1.37. 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. V currently has a PEG ratio of 2.25.

Another notable valuation metric for WEX is its P/B ratio of 5.94. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, V has a P/B of 16.4.

These are just a few of the metrics contributing to WEX's Value grade of A and V's Value grade of D.

WEX 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 WEX 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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