XP vs. SOFI: Which Stock Is the Better Value Option?

Investors interested in Financial - Miscellaneous Services stocks are likely familiar with XP Inc.A (XP) and SoFi Technologies, Inc. (SOFI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

XP Inc.A and SoFi Technologies, Inc. are both sporting 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 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.

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.

XP currently has a forward P/E ratio of 11.35, while SOFI has a forward P/E of 80.96. We also note that XP has a PEG ratio of 0.91. 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. SOFI currently has a PEG ratio of 2.94.

Another notable valuation metric for XP is its P/B ratio of 2.48. 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, SOFI has a P/B of 4.05.

Based on these metrics and many more, XP holds a Value grade of A, while SOFI has a Value grade of F.

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