Investors looking for stocks in the Gaming sector might want to consider either Churchill Downs (CHDN) or Electronic Arts (EA). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Churchill Downs and Electronic Arts are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CHDN likely has seen a stronger improvement to its earnings outlook than EA 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.
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.
CHDN currently has a forward P/E ratio of 15.85, while EA has a forward P/E of 20.39. We also note that CHDN has a PEG ratio of 1.82. 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. EA currently has a PEG ratio of 1.91.
Another notable valuation metric for CHDN is its P/B ratio of 6.48. 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, EA has a P/B of 6.92.
These metrics, and several others, help CHDN earn a Value grade of A, while EA has been given a Value grade of C.
CHDN stands above EA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CHDN is the superior value 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
Churchill Downs, Incorporated (CHDN): Free Stock Analysis Report Electronic Arts Inc. (EA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
