Investors interested in Broadcast Radio and Television stocks are likely familiar with Discovery Communications (DISCA) and Netflix (NFLX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Discovery Communications has a Zacks Rank of #2 (Buy), while Netflix has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DISCA likely has seen a stronger improvement to its earnings outlook than NFLX has recently. However, value investors will care about much more than just this.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DISCA currently has a forward P/E ratio of 14.80, while NFLX has a forward P/E of 112.72. We also note that DISCA has a PEG ratio of 0.55. 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. NFLX currently has a PEG ratio of 3.76.
Another notable valuation metric for DISCA is its P/B ratio of 1.72. 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 25.60.
Based on these metrics and many more, DISCA holds a Value grade of A, while NFLX has a 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
Netflix, Inc. (NFLX) : Free Stock Analysis Report
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