WEX or V: Which Is the Better Value Stock Right Now?

Investors interested in Financial Transaction Services stocks are likely familiar with Wex (WEX) and Visa (V). 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 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.

Wex and Visa are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that WEX has an improving earnings outlook. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

WEX currently has a forward P/E ratio of 8.58, while V has a forward P/E of 27.91. We also note that WEX has a PEG ratio of 0.93. 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. V currently has a PEG ratio of 2.10.

Another notable valuation metric for WEX is its P/B ratio of 4.65. 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, V has a P/B of 17.53.

These metrics, and several others, help WEX earn a Value grade of A, while V has been given a Value grade of D.

WEX has seen stronger estimate revision activity and sports more attractive valuation metrics than V, so it seems like value investors will conclude that WEX is the superior option right now.

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

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