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

Investors looking for stocks in the Financial Transaction Services sector might want to consider either PagSeguro Digital Ltd. (PAGS) or 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.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

PagSeguro Digital Ltd. has a Zacks Rank of #2 (Buy), while Shift4 Payments has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PAGS has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

PAGS currently has a forward P/E ratio of 8.01, while FOUR has a forward P/E of 15.97. We also note that PAGS has a PEG ratio of 0.70. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FOUR currently has a PEG ratio of 0.72.

Another notable valuation metric for PAGS is its P/B ratio of 1.38. 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, FOUR has a P/B of 7.51.

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

PAGS has seen stronger estimate revision activity and sports more attractive valuation metrics than FOUR, so it seems like value investors will conclude that PAGS is the superior option right now.

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

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