BABA vs. CPNG: Which Stock Is the Better Value Option?

Investors looking for stocks in the Internet - Commerce sector might want to consider either Alibaba (BABA) or Coupang, Inc. (CPNG). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Alibaba has a Zacks Rank of #1 (Strong Buy), while Coupang, Inc. has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BABA is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 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.

BABA currently has a forward P/E ratio of 9.18, while CPNG has a forward P/E of 54.55. We also note that BABA has a PEG ratio of 0.30. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CPNG currently has a PEG ratio of 54.01.

Another notable valuation metric for BABA is its P/B ratio of 1.59. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CPNG has a P/B of 8.70.

These are just a few of the metrics contributing to BABA's Value grade of B and CPNG's Value grade of D.

BABA has seen stronger estimate revision activity and sports more attractive valuation metrics than CPNG, so it seems like value investors will conclude that BABA is the superior option right now.

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

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