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

Zacks Equity Research
Vanda (VNDA) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Investors interested in stocks from the Financial - Miscellaneous Services sector have probably already heard of Orix (IX) and Standard Life PLC Unsponsored ADR (SLFPY). 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.

Currently, Orix has a Zacks Rank of #2 (Buy), while Standard Life PLC Unsponsored ADR has a Zacks Rank of #5 (Strong Sell). This means that IX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 6.93, while SLFPY has a forward P/E of 12.12. We also note that IX has a PEG ratio of 0.97. 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. SLFPY currently has a PEG ratio of 3.37.

Another notable valuation metric for IX is its P/B ratio of 0.78. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SLFPY has a P/B of 1.01.

These metrics, and several others, help IX earn a Value grade of A, while SLFPY has been given a Value grade of D.

IX 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 IX is likely the superior value option right now.


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