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Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both XP Inc.A (XP) and Coinbase Global, Inc. (COIN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both XP Inc.A and Coinbase Global, Inc. have a Zacks Rank of # 1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
XP currently has a forward P/E ratio of 9.26, while COIN has a forward P/E of 26.18. We also note that XP has a PEG ratio of 0.66. 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. COIN currently has a PEG ratio of 9.77.
Another notable valuation metric for XP is its P/B ratio of 2.21. 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, COIN has a P/B of 4.73.
These are just a few of the metrics contributing to XP's Value grade of A and COIN's Value grade of F.
Both XP and COIN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that XP is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).