Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both Virtu Financial (VIRT) and Moody's (MCO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Virtu Financial is sporting a Zacks Rank of #2 (Buy), while Moody's has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VIRT has an improving earnings outlook. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
VIRT currently has a forward P/E ratio of 10.88, while MCO has a forward P/E of 35.40. We also note that VIRT has a PEG ratio of 1.01. 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. MCO currently has a PEG ratio of 2.76.
Another notable valuation metric for VIRT is its P/B ratio of 4.32. 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, MCO has a P/B of 22.45.
These metrics, and several others, help VIRT earn a Value grade of B, while MCO has been given a Value grade of F.
VIRT has seen stronger estimate revision activity and sports more attractive valuation metrics than MCO, so it seems like value investors will conclude that VIRT is the superior option right now.
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Virtu Financial, Inc. (VIRT): Free Stock Analysis Report Moody's Corporation (MCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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