Investors with an interest in Internet - Commerce stocks have likely encountered both TripAdvisor (TRIP) and eBay (EBAY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, TripAdvisor is sporting a Zacks Rank of #2 (Buy), while eBay has a Zacks Rank of #3 (Hold). This means that TRIP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
TRIP currently has a forward P/E ratio of 7.68, while EBAY has a forward P/E of 15.89. We also note that TRIP has a PEG ratio of 0.67. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EBAY currently has a PEG ratio of 1.77.
Another notable valuation metric for TRIP is its P/B ratio of 2.25. 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, EBAY has a P/B of 8.99.
These are just a few of the metrics contributing to TRIP's Value grade of A and EBAY's Value grade of C.
TRIP has seen stronger estimate revision activity and sports more attractive valuation metrics than EBAY, so it seems like value investors will conclude that TRIP is the superior option right now.
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TripAdvisor, Inc. (TRIP): Free Stock Analysis Report eBay Inc. (EBAY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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