Investors interested in stocks from the Internet - Software and Services sector have probably already heard of Donnelley Financial Solutions (DFIN) and RingCentral (RNG). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Donnelley Financial Solutions has a Zacks Rank of #2 (Buy), while RingCentral has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DFIN likely has seen a stronger improvement to its earnings outlook than RNG has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
DFIN currently has a forward P/E ratio of 8.84, while RNG has a forward P/E of 129.96. We also note that DFIN has a PEG ratio of 1.10. 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. RNG currently has a PEG ratio of 3.71.
Another notable valuation metric for DFIN is its P/B ratio of 2.20. 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, RNG has a P/B of 23.03.
These are just a few of the metrics contributing to DFIN's Value grade of A and RNG's Value grade of F.
DFIN sticks out from RNG in both our Zacks Rank and Style Scores models, so value investors will likely feel that DFIN is the better option right now.
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Donnelley Financial Solutions Inc. (DFIN) : Free Stock Analysis Report
Ringcentral, Inc. (RNG) : Free Stock Analysis Report
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