Investors with an interest in Communication - Infrastructure stocks have likely encountered both Adtran (ADTN) and Zayo Group (ZAYO). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, Adtran is sporting a Zacks Rank of #2 (Buy), while Zayo Group has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ADTN has an improving earnings outlook. But this is just one piece of the puzzle 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ADTN currently has a forward P/E ratio of 35.33, while ZAYO has a forward P/E of 51.15. We also note that ADTN has a PEG ratio of 7.07. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZAYO currently has a PEG ratio of 10.23.
Another notable valuation metric for ADTN is its P/B ratio of 1.30. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ZAYO has a P/B of 6.33.
These are just a few of the metrics contributing to ADTN's Value grade of B and ZAYO's Value grade of C.
ADTN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ADTN is likely the superior value option right now.
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ADTRAN, Inc. (ADTN) : Free Stock Analysis Report
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