DTC or MELI: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Internet - Commerce sector have probably already heard of Solo Brands, Inc. (DTC) and MercadoLibre (MELI). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Solo Brands, Inc. has a Zacks Rank of #1 (Strong Buy), while MercadoLibre has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DTC likely has seen a stronger improvement to its earnings outlook than MELI has recently. However, value investors will care about much more than just this.
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 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.
DTC currently has a forward P/E ratio of 8.30, while MELI has a forward P/E of 84.97. We also note that DTC has a PEG ratio of 0.48. 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. MELI currently has a PEG ratio of 1.72.
Another notable valuation metric for DTC is its P/B ratio of 1.32. 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, MELI has a P/B of 36.38.
Based on these metrics and many more, DTC holds a Value grade of B, while MELI has a Value grade of C.
DTC stands above MELI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DTC is the superior value option right now.
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Solo Brands, Inc. (DTC) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
