STNE vs. INFA: Which Stock Is the Better Value Option?

Investors interested in Internet - Software stocks are likely familiar with StoneCo Ltd. (STNE) and Informatica Inc. (INFA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

StoneCo Ltd. and Informatica Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STNE is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

STNE currently has a forward P/E ratio of 9.94, while INFA has a forward P/E of 21.69. We also note that STNE has a PEG ratio of 0.33. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. INFA currently has a PEG ratio of 2.93.

Another notable valuation metric for STNE is its P/B ratio of 2.23. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, INFA has a P/B of 3.12.

These metrics, and several others, help STNE earn a Value grade of B, while INFA has been given a Value grade of D.

STNE sticks out from INFA in both our Zacks Rank and Style Scores models, so value investors will likely feel that STNE is the better option right now.

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

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