Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both Orix (IX) and Axos Financial (AX). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Orix and Axos Financial are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that IX is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
IX currently has a forward P/E ratio of 6.55, while AX has a forward P/E of 9.96. We also note that IX has a PEG ratio of 0.92. 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. AX currently has a PEG ratio of 1.
Another notable valuation metric for IX is its P/B ratio of 0.79. 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, AX has a P/B of 1.81.
These metrics, and several others, help IX earn a Value grade of A, while AX has been given a Value grade of C.
IX stands above AX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that IX is the superior value option right now.
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