Investors looking for stocks in the Internet - Services sector might want to consider either Baidu Inc. (BIDU) or HealthStream (HSTM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Baidu Inc. and HealthStream are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BIDU likely has seen a stronger improvement to its earnings outlook than HSTM has recently. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BIDU currently has a forward P/E ratio of 13.26, while HSTM has a forward P/E of 72.03. We also note that BIDU has a PEG ratio of 0.64. 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. HSTM currently has a PEG ratio of 7.20.
Another notable valuation metric for BIDU is its P/B ratio of 1.26. 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, HSTM has a P/B of 2.
These metrics, and several others, help BIDU earn a Value grade of B, while HSTM has been given a Value grade of C.
BIDU has seen stronger estimate revision activity and sports more attractive valuation metrics than HSTM, so it seems like value investors will conclude that BIDU is the superior option right now.
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