NTES vs. TYL: Which Stock Is the Better Value Option?

Investors with an interest in Internet - Software and Services stocks have likely encountered both NetEase (NTES) and Tyler Technologies (TYL). 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.

NetEase and Tyler Technologies 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 NTES is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

NTES currently has a forward P/E ratio of 15.97, while TYL has a forward P/E of 40.82. We also note that NTES has a PEG ratio of 1.50. 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. TYL currently has a PEG ratio of 2.72.

Another notable valuation metric for NTES is its P/B ratio of 3.86. 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, TYL has a P/B of 5.56.

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

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

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

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