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

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Zacks Equity Research
·2 min read
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Investors interested in stocks from the Business - Services sector have probably already heard of 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

General Finance has a Zacks Rank of #2 (Buy), while SPS Commerce has a Zacks Rank of #3 (Hold) 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 just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

GFN currently has a forward P/E ratio of 22.41, while SPSC has a forward P/E of 61.31. We also note that GFN has a PEG ratio of 1.87. 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. SPSC currently has a PEG ratio of 4.09.

Another notable valuation metric for GFN is its P/B ratio of 1.48. 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 8.14.

These metrics, and several others, help GFN earn a Value grade of B, while SPSC has been given a Value grade of F.

GFN sticks out from SPSC in both our Zacks Rank and Style Scores models, so value investors will likely feel that GFN is the better 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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Zacks Investment Research