Investors looking for stocks in the Computer - Software sector might want to consider either Nuance Communications (NUAN) or Cornerstone OnDemand (CSOD). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Nuance Communications and Cornerstone OnDemand are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that NUAN likely has seen a stronger improvement to its earnings outlook than CSOD has recently. 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.
NUAN currently has a forward P/E ratio of 14.85, while CSOD has a forward P/E of 50.67. We also note that NUAN has a PEG ratio of 1.24. 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. CSOD currently has a PEG ratio of 6.33.
Another notable valuation metric for NUAN is its P/B ratio of 2.44. 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, CSOD has a P/B of 40.94.
These are just a few of the metrics contributing to NUAN's Value grade of B and CSOD's Value grade of F.
NUAN 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 NUAN is likely the superior value option right now.
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Nuance Communications, Inc. (NUAN) : Free Stock Analysis Report
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