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GFN vs. SPSC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
The Children's Place (PLCE) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors interested in Business - Services stocks are likely familiar with General Finance (GFN) and SPS Commerce (SPSC). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

General Finance and SPS Commerce are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GFN has an improving earnings outlook. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

GFN currently has a forward P/E ratio of 30.24, while SPSC has a forward P/E of 52.09. We also note that GFN has a PEG ratio of 2.75. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SPSC currently has a PEG ratio of 3.47.

Another notable valuation metric for GFN is its P/B ratio of 2.26. 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, SPSC has a P/B of 6.02.

These are just a few of the metrics contributing to GFN's Value grade of A and SPSC's Value grade of F.

GFN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GFN is likely the superior value option right now.


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General Finance Corporation (GFN) : Free Stock Analysis Report
 
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