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Investors looking for stocks in the Internet - Software sector might want to consider either Five9 (FIVN) or Adyen N.V. Unsponsored ADR (ADYEY). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Five9 and Adyen N.V. Unsponsored ADR are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
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 9.62, while ADYEY has a forward P/E of 45.28. We also note that FIVN has a PEG ratio of 0.61. 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. ADYEY currently has a PEG ratio of 2.17.
Another notable valuation metric for FIVN is its P/B ratio of 3.05. 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, ADYEY has a P/B of 14.36.
Based on these metrics and many more, FIVN holds a Value grade of B, while ADYEY has a Value grade of F.
Both FIVN and ADYEY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FIVN is the superior value option right now.
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Five9, Inc. (FIVN) : Free Stock Analysis Report
Adyen N.V. Unsponsored ADR (ADYEY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).