Investors with an interest in Internet - Software stocks have likely encountered both Meta Platforms (META) and New Relic (NEWR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Meta Platforms and New Relic have a Zacks Rank of # 2 (Buy) right now. 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
META currently has a forward P/E ratio of 22.76, while NEWR has a forward P/E of 51.03. We also note that META has a PEG ratio of 0.98. 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. NEWR currently has a PEG ratio of 1.90.
Another notable valuation metric for META is its P/B ratio of 5.78. 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, NEWR has a P/B of 17.01.
These are just a few of the metrics contributing to META's Value grade of B and NEWR's Value grade of D.
Both META and NEWR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that META is the superior value option right now.
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