Investors with an interest in Computer - Software stocks have likely encountered both Salesforce.com (CRM) and Intuit (INTU). But which of these two companies is the best option for those looking for undervalued stocks? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Salesforce.com and Intuit are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CRM has an improving earnings outlook. But this is only part of the picture for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CRM currently has a forward P/E ratio of 14.90, while INTU has a forward P/E of 18.22. We also note that CRM has a PEG ratio of 0.99. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. INTU currently has a PEG ratio of 1.28.
Another notable valuation metric for CRM is its P/B ratio of 3.02. 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, INTU has a P/B of 6.07.
These are just a few of the metrics contributing to CRM's Value grade of B and INTU's Value grade of D.
CRM sticks out from INTU in both our Zacks Rank and Style Scores models, so value investors will likely feel that CRM is the better option right now.
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Salesforce Inc. (CRM): Free Stock Analysis Report Intuit Inc. (INTU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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