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RBBN or ATEN: Which Is the Better Value Stock Right Now?

Zacks Equity Research
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Investors interested in Communication - Network Software stocks are likely familiar with Ribbon Communications (RBBN) and A10 Networks (ATEN). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Ribbon Communications and A10 Networks are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that RBBN likely has seen a stronger improvement to its earnings outlook than ATEN has recently. However, value investors will care about much more than just this.

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.

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.

RBBN currently has a forward P/E ratio of 8.77, while ATEN has a forward P/E of 200. We also note that RBBN has a PEG ratio of 0.73. 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. ATEN currently has a PEG ratio of 8.51.

Another notable valuation metric for RBBN is its P/B ratio of 1.01. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ATEN has a P/B of 5.21.

These are just a few of the metrics contributing to RBBN's Value grade of B and ATEN's Value grade of D.

RBBN has seen stronger estimate revision activity and sports more attractive valuation metrics than ATEN, so it seems like value investors will conclude that RBBN is the superior option right now.


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