Investors interested in stocks from the Internet - Commerce sector have probably already heard of Expedia (EXPE) and MercadoLibre (MELI). 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.
Right now, Expedia is sporting a Zacks Rank of #2 (Buy), while MercadoLibre has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EXPE has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
EXPE currently has a forward P/E ratio of 16.29, while MELI has a forward P/E of 36.29. We also note that EXPE has a PEG ratio of 0.92. 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. MELI currently has a PEG ratio of 1.08.
Another notable valuation metric for EXPE is its P/B ratio of 14.04. 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, MELI has a P/B of 17.63.
These are just a few of the metrics contributing to EXPE's Value grade of B and MELI's Value grade of C.
EXPE has seen stronger estimate revision activity and sports more attractive valuation metrics than MELI, so it seems like value investors will conclude that EXPE is the superior option right now.
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Expedia Group, Inc. (EXPE): Free Stock Analysis Report MercadoLibre, Inc. (MELI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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