Investors looking for stocks in the Internet - Software sector might want to consider either VTEX (VTEX) or Spotify (SPOT). 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.
VTEX and Spotify are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that VTEX is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
VTEX currently has a forward P/E ratio of 23.22, while SPOT has a forward P/E of 32.37. We also note that VTEX has a PEG ratio of 0.62. 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. SPOT currently has a PEG ratio of 1.11.
Another notable valuation metric for VTEX is its P/B ratio of 2.69. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SPOT has a P/B of 11.08.
Based on these metrics and many more, VTEX holds a Value grade of B, while SPOT has a Value grade of D.
VTEX sticks out from SPOT in both our Zacks Rank and Style Scores models, so value investors will likely feel that VTEX is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
VTEX (VTEX): Free Stock Analysis Report Spotify Technology (SPOT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
