Investors with an interest in Internet - Commerce stocks have likely encountered both Expedia (EXPE) and MercadoLibre (MELI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Expedia is sporting a Zacks Rank of #2 (Buy), while MercadoLibre has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EXPE is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
EXPE currently has a forward P/E ratio of 14.80, while MELI has a forward P/E of 50.52. We also note that EXPE has a PEG ratio of 0.89. 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. MELI currently has a PEG ratio of 1.46.
Another notable valuation metric for EXPE is its P/B ratio of 12.79. 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, MELI has a P/B of 19.06.
Based on these metrics and many more, EXPE holds a Value grade of A, while MELI has a Value grade of D.
EXPE has seen stronger estimate revision activity and sports more attractive valuation metrics than MELI, so it seems like value investors will conclude that EXPE is the superior option right now.
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Expedia Group, Inc. (EXPE): Free Stock Analysis Report MercadoLibre, Inc. (MELI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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