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IX vs. OCSL: Which Stock Is the Better Value Option?

Zacks Equity Research
NantHealth, Inc. (NH) delivered earnings and revenue surprises of 23.08% and -10.83%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

Investors interested in Financial - Miscellaneous Services stocks are likely familiar with Orix (IX) and Oaktree Specialty Lending (OCSL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, both Orix and Oaktree Specialty Lending are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.

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.

IX currently has a forward P/E ratio of 6.97, while OCSL has a forward P/E of 12.02. We also note that IX has a PEG ratio of 0.99. 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. OCSL currently has a PEG ratio of 6.01.

Another notable valuation metric for IX is its P/B ratio of 0.78. 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, OCSL has a P/B of 0.84.

These are just a few of the metrics contributing to IX's Value grade of A and OCSL's Value grade of C.

Both IX and OCSL are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that IX is the superior value option right now.


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