Investors with an interest in Financial - Investment Management stocks have likely encountered both Eaton Vance (EV) and Hargreaves Lansdown plc (HRGLY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Eaton Vance has a Zacks Rank of #2 (Buy), while Hargreaves Lansdown plc 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 EV is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
EV currently has a forward P/E ratio of 12.62, while HRGLY has a forward P/E of 36.37. We also note that EV has a PEG ratio of 2.38. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HRGLY currently has a PEG ratio of 3.01.
Another notable valuation metric for EV is its P/B ratio of 4.41. 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, HRGLY has a P/B of 21.02.
These metrics, and several others, help EV earn a Value grade of A, while HRGLY has been given a Value grade of F.
EV stands above HRGLY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EV is the superior value option right now.
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