FUTU vs. APP: Which Stock Is the Better Value Option?

Investors interested in Technology Services stocks are likely familiar with Futu Holdings Limited Sponsored ADR (FUTU) and AppLovin (APP). But which of these two stocks presents investors with the better value opportunity right now? 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.

Both Futu Holdings Limited Sponsored ADR and AppLovin have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

FUTU currently has a forward P/E ratio of 21.77, while APP has a forward P/E of 69.81. We also note that FUTU has a PEG ratio of 0.80. 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. APP currently has a PEG ratio of 3.49.

Another notable valuation metric for FUTU is its P/B ratio of 5.97. 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, APP has a P/B of 186.67.

These metrics, and several others, help FUTU earn a Value grade of B, while APP has been given a Value grade of F.

Both FUTU and APP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FUTU 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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