FIVN vs. INFA: Which Stock Is the Better Value Option?

Investors interested in stocks from the Internet - Software sector have probably already heard of Five9 (FIVN) and Informatica Inc. (INFA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Five9 has a Zacks Rank of #2 (Buy), while Informatica Inc. has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FIVN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

FIVN currently has a forward P/E ratio of 9.66, while INFA has a forward P/E of 20.90. We also note that FIVN has a PEG ratio of 0.62. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. INFA currently has a PEG ratio of 2.75.

Another notable valuation metric for FIVN is its P/B ratio of 3.06. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, INFA has a P/B of 3.2.

Based on these metrics and many more, FIVN holds a Value grade of B, while INFA has a Value grade of D.

FIVN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that FIVN is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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