Investors interested in stocks from the Broadcast Radio and Television sector have probably already heard of Discovery Communications (DISCA) and Netflix (NFLX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Discovery Communications has a Zacks Rank of #2 (Buy), while Netflix has a Zacks Rank of #3 (Hold). This means that DISCA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
DISCA currently has a forward P/E ratio of 7.71, while NFLX has a forward P/E of 90.61. We also note that DISCA has a PEG ratio of 0.40. 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. NFLX currently has a PEG ratio of 3.02.
Another notable valuation metric for DISCA is its P/B ratio of 1.34. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NFLX has a P/B of 18.72.
These are just a few of the metrics contributing to DISCA's Value grade of A and NFLX's Value grade of F.
DISCA stands above NFLX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DISCA is the superior value option right now.
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Discovery, Inc. (DISCA) : Free Stock Analysis Report
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