BUR vs. AXP: Which Stock Should Value Investors Buy Now?

Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both Burford Capital Limited (BUR) and American Express (AXP). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Burford Capital Limited has a Zacks Rank of #2 (Buy), while American Express has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BUR has an improving earnings outlook. But this is just one piece of the puzzle 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

BUR currently has a forward P/E ratio of 6.18, while AXP has a forward P/E of 20.41. We also note that BUR has a PEG ratio of 0.16. 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. AXP currently has a PEG ratio of 1.50.

Another notable valuation metric for BUR is its P/B ratio of 0.66. 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, AXP has a P/B of 7.61.

Based on these metrics and many more, BUR holds a Value grade of A, while AXP has a Value grade of C.

BUR is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BUR is likely the superior value option right now.

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

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