WEX vs. V: Which Stock Is the Better Value Option?

Investors looking for stocks in the Financial Transaction Services sector might want to consider either Wex (WEX) or Visa (V). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.

Currently, Wex has a Zacks Rank of #2 (Buy), while Visa has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that WEX likely has seen a stronger improvement to its earnings outlook than V has recently. 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 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.

WEX currently has a forward P/E ratio of 9.78, while V has a forward P/E of 26.83. We also note that WEX has a PEG ratio of 1.16. 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. V currently has a PEG ratio of 2.04.

Another notable valuation metric for WEX is its P/B ratio of 5.35. 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, V has a P/B of 16.7.

These metrics, and several others, help WEX earn a Value grade of A, while V has been given a Value grade of D.

WEX stands above V thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WEX 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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