Investors with an interest in Computer - Software stocks have likely encountered both Nuance Communications (NUAN) and Pegasystems (PEGA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Nuance Communications has a Zacks Rank of #2 (Buy), while Pegasystems has a Zacks Rank of #5 (Strong Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NUAN has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
NUAN currently has a forward P/E ratio of 14.63, while PEGA has a forward P/E of 1,560.21. We also note that NUAN has a PEG ratio of 2.93. 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. PEGA currently has a PEG ratio of 195.03.
Another notable valuation metric for NUAN is its P/B ratio of 2.40. 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, PEGA has a P/B of 9.76.
Based on these metrics and many more, NUAN holds a Value grade of B, while PEGA has a 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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