GTM vs. FFIV: Which Stock Is the Better Value Option?

Investors interested in Internet - Software stocks are likely familiar with ZoomInfo (GTM) and F5 Networks (FFIV). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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

Both ZoomInfo and F5 Networks have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

GTM currently has a forward P/E ratio of 11.61, while FFIV has a forward P/E of 20.99. We also note that GTM has a PEG ratio of 1.64. 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. FFIV currently has a PEG ratio of 2.94.

Another notable valuation metric for GTM is its P/B ratio of 2.4. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FFIV has a P/B of 5.34.

These metrics, and several others, help GTM earn a Value grade of B, while FFIV has been given a Value grade of D.

Both GTM and FFIV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GTM is the superior value option right now.

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

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