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Investors interested in stocks from the Financial Transaction Services sector have probably already heard of PagSeguro Digital Ltd. (PAGS) and Shift4 Payments (FOUR). 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 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, PagSeguro Digital Ltd. is sporting a Zacks Rank of #1 (Strong Buy), while Shift4 Payments 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 PAGS has an improving earnings 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.
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.
PAGS currently has a forward P/E ratio of 6.17, while FOUR has a forward P/E of 17.61. We also note that PAGS has a PEG ratio of 0.45. 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. FOUR currently has a PEG ratio of 0.67.
Another notable valuation metric for PAGS is its P/B ratio of 0.93. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FOUR has a P/B of 7.32.
These metrics, and several others, help PAGS earn a Value grade of B, while FOUR has been given a Value grade of C.
PAGS sticks out from FOUR in both our Zacks Rank and Style Scores models, so value investors will likely feel that PAGS is the better option right now.
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PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report
Shift4 Payments, Inc. (FOUR) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).