Investors interested in Internet - Commerce stocks are likely familiar with eBay (EBAY) and Amazon (AMZN). But which of these two stocks presents investors with the better value opportunity right now? 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.
eBay and Amazon are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EBAY is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
EBAY currently has a forward P/E ratio of 14.80, while AMZN has a forward P/E of 125.60. We also note that EBAY has a PEG ratio of 1.19. 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. AMZN currently has a PEG ratio of 5.23.
Another notable valuation metric for EBAY is its P/B ratio of 15.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AMZN has a P/B of 18.89.
These metrics, and several others, help EBAY earn a Value grade of B, while AMZN has been given a Value grade of F.
EBAY stands above AMZN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EBAY is the superior value option right now.
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