Investors with an interest in Consumer Products - Discretionary stocks have likely encountered both PCM (PCMI) and Funko, Inc. (FNKO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
PCM has a Zacks Rank of #2 (Buy), while Funko, Inc. 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 PCMI 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.
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.
PCMI currently has a forward P/E ratio of 9.31, while FNKO has a forward P/E of 21.30. We also note that PCMI has a PEG ratio of 0.47. 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. FNKO currently has a PEG ratio of 1.16.
Another notable valuation metric for PCMI is its P/B ratio of 1.87. 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, FNKO has a P/B of 3.98.
These are just a few of the metrics contributing to PCMI's Value grade of A and FNKO's Value grade of C.
PCMI 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 PCMI is likely the superior value option right now.
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