Investors interested in Financial Transaction Services stocks are likely familiar with Alliance Data Systems (ADS) and Fiserv (FISV). 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.
Currently, Alliance Data Systems has a Zacks Rank of #2 (Buy), while Fiserv has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ADS likely has seen a stronger improvement to its earnings outlook than FISV has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
ADS currently has a forward P/E ratio of 6.17, while FISV has a forward P/E of 24.94. We also note that ADS has a PEG ratio of 1. 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. FISV currently has a PEG ratio of 1.93.
Another notable valuation metric for ADS is its P/B ratio of 2.18. 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, FISV has a P/B of 2.21.
These are just a few of the metrics contributing to ADS's Value grade of A and FISV's Value grade of D.
ADS sticks out from FISV in both our Zacks Rank and Style Scores models, so value investors will likely feel that ADS is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Alliance Data Systems Corporation (ADS) : Free Stock Analysis Report
Fiserv, Inc. (FISV) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research