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GFN vs. SPSC: Which Stock Is the Better Value Option?

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Zacks Equity Research
·2 min read
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Investors with an interest in Business - Services stocks have likely encountered both General Finance (GFN) and SPS Commerce (SPSC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, General Finance has a Zacks Rank of #2 (Buy), while SPS Commerce 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 GFN is likely seeing its earnings outlook improve to a greater extent. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

GFN currently has a forward P/E ratio of 22.28, while SPSC has a forward P/E of 56.53. We also note that GFN has a PEG ratio of 1.86. 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. SPSC currently has a PEG ratio of 3.77.

Another notable valuation metric for GFN is its P/B ratio of 1.47. 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, SPSC has a P/B of 7.57.

Based on these metrics and many more, GFN holds a Value grade of B, while SPSC has a Value grade of D.

GFN stands above SPSC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GFN is the superior value option right now.


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General Finance Corporation (GFN) : Free Stock Analysis Report
 
SPS Commerce, Inc. (SPSC) : Free Stock Analysis Report
 
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