Investors with an interest in Technology Services stocks have likely encountered both Futu Holdings Limited Sponsored ADR (FUTU) and AppLovin (APP). 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.
Futu Holdings Limited Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while AppLovin has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FUTU has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
FUTU currently has a forward P/E ratio of 21.28, while APP has a forward P/E of 62.74. We also note that FUTU has a PEG ratio of 0.67. 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. APP currently has a PEG ratio of 3.14.
Another notable valuation metric for FUTU is its P/B ratio of 6.11. 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, APP has a P/B of 134.22.
These are just a few of the metrics contributing to FUTU's Value grade of B and APP's Value grade of D.
FUTU has seen stronger estimate revision activity and sports more attractive valuation metrics than APP, so it seems like value investors will conclude that FUTU is the superior option right now.
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Futu Holdings Limited Sponsored ADR (FUTU): Free Stock Analysis Report AppLovin Corporation (APP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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