Investors interested in Financial - Investment Management stocks are likely familiar with Patria Investments (PAX) and Carlyle Group (CG). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Patria Investments is sporting a Zacks Rank of #1 (Strong Buy), while Carlyle Group has a Zacks Rank of #3 (Hold). This means that PAX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
PAX currently has a forward P/E ratio of 8.40, while CG has a forward P/E of 10.93. We also note that PAX has a PEG ratio of 0.53. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CG currently has a PEG ratio of 0.94.
Another notable valuation metric for PAX is its P/B ratio of 1.39. 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, CG has a P/B of 2.69.
Based on these metrics and many more, PAX holds a Value grade of A, while CG has a Value grade of C.
PAX sticks out from CG in both our Zacks Rank and Style Scores models, so value investors will likely feel that PAX is the better option right now.
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Patria Investments Limited (PAX): Free Stock Analysis Report Carlyle Group Inc. (CG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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