Investors looking for stocks in the Internet - Software sector might want to consider either StoneCo Ltd. (STNE) or Informatica Inc. (INFA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
StoneCo Ltd. and Informatica Inc. are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that STNE'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.
STNE currently has a forward P/E ratio of 9.37, while INFA has a forward P/E of 20.91. We also note that STNE has a PEG ratio of 0.36. 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. INFA currently has a PEG ratio of 2.75.
Another notable valuation metric for STNE is its P/B ratio of 1.96. 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, INFA has a P/B of 3.20.
These are just a few of the metrics contributing to STNE's Value grade of B and INFA's Value grade of D.
STNE has seen stronger estimate revision activity and sports more attractive valuation metrics than INFA, so it seems like value investors will conclude that STNE is the superior option right now.
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StoneCo Ltd. (STNE): Free Stock Analysis Report Informatica Inc. (INFA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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