Investors looking for stocks in the Internet - Commerce sector might want to consider either eBay (EBAY) or Amazon (AMZN). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, eBay has a Zacks Rank of #2 (Buy), while Amazon has a Zacks Rank of #3 (Hold). 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 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 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 13.82, while AMZN has a forward P/E of 65.43. We also note that EBAY has a PEG ratio of 1.45. 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. AMZN currently has a PEG ratio of 2.10.
Another notable valuation metric for EBAY is its P/B ratio of 5.37. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, AMZN has a P/B of 19.87.
Based on these metrics and many more, EBAY holds a Value grade of B, while AMZN has a Value grade of D.
EBAY sticks out from AMZN in both our Zacks Rank and Style Scores models, so value investors will likely feel that EBAY is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
eBay Inc. (EBAY) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
To read this article on Zacks.com click here.