Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Synchrony (SYF) or American Express (AXP). 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 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.
Right now, Synchrony is sporting a Zacks Rank of #2 (Buy), while American Express has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SYF is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
SYF currently has a forward P/E ratio of 8.34, while AXP has a forward P/E of 22.70. We also note that SYF has a PEG ratio of 0.74. 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. AXP currently has a PEG ratio of 1.82.
Another notable valuation metric for SYF is its P/B ratio of 1.68. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AXP has a P/B of 7.44.
These are just a few of the metrics contributing to SYF's Value grade of A and AXP's Value grade of C.
SYF stands above AXP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SYF is the superior value option right now.
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Synchrony Financial (SYF): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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