Investors interested in stocks from the Internet - Software and Services sector have probably already heard of NetEase (NTES) and Vonage Holdings (VG). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
NetEase has a Zacks Rank of #2 (Buy), while Vonage Holdings 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 NTES has an improving earnings outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
NTES currently has a forward P/E ratio of 23.31, while VG has a forward P/E of 49.44. We also note that NTES has a PEG ratio of 0.73. 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. VG currently has a PEG ratio of 9.89.
Another notable valuation metric for NTES is its P/B ratio of 4.35. 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, VG has a P/B of 5.80.
These are just a few of the metrics contributing to NTES's Value grade of B and VG's Value grade of D.
NTES stands above VG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NTES is the superior value option right now.
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NetEase, Inc. (NTES) : Free Stock Analysis Report
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