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DISCA vs. NFLX: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Broadcast Radio and Television sector might want to consider either Discovery Communications (DISCA) or Netflix (NFLX). 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.

Discovery Communications has a Zacks Rank of #2 (Buy), while Netflix has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DISCA likely has seen a stronger improvement to its earnings outlook than NFLX has recently. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

DISCA currently has a forward P/E ratio of 7.54, while NFLX has a forward P/E of 86.09. We also note that DISCA has a PEG ratio of 0.39. 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. NFLX currently has a PEG ratio of 2.87.

Another notable valuation metric for DISCA is its P/B ratio of 1.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NFLX has a P/B of 18.34.

These metrics, and several others, help DISCA earn a Value grade of A, while NFLX has been given a Value grade of F.

DISCA 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 DISCA is likely the superior value option right now.


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Discovery, Inc. (DISCA) : Free Stock Analysis Report
 
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