STNE vs. FFIV: Which Stock Is the Better Value Option?

Investors looking for stocks in the Internet - Software sector might want to consider either StoneCo Ltd. (STNE) or F5 Networks (FFIV). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

StoneCo Ltd. has a Zacks Rank of #1 (Strong Buy), while F5 Networks has a Zacks Rank of #3 (Hold) 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 just one factor that value investors are interested in.

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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

STNE currently has a forward P/E ratio of 10.60, while FFIV has a forward P/E of 19.83. We also note that STNE has a PEG ratio of 0.40. 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. FFIV currently has a PEG ratio of 2.88.

Another notable valuation metric for STNE is its P/B ratio of 2.19. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, FFIV has a P/B of 5.

These metrics, and several others, help STNE earn a Value grade of B, while FFIV has been given a Value grade of D.

STNE sticks out from FFIV in both our Zacks Rank and Style Scores models, so value investors will likely feel that STNE is the better option right now.

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

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