YELP vs. RELX: Which Stock Is the Better Value Option?

Investors interested in Internet - Content stocks are likely familiar with Yelp (YELP) and RELX PLC (RELX). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Yelp has a Zacks Rank of #1 (Strong Buy), while RELX PLC has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that YELP likely has seen a stronger improvement to its earnings outlook than RELX has recently. However, value investors will care about much more than just this.

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.

YELP currently has a forward P/E ratio of 16.23, while RELX has a forward P/E of 26.55. We also note that YELP has a PEG ratio of 0.85. 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. RELX currently has a PEG ratio of 2.94.

Another notable valuation metric for YELP is its P/B ratio of 2.89. 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, RELX has a P/B of 28.29.

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

YELP 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 YELP 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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