Investors interested in Internet - Software and Services stocks are likely familiar with Sabre (SABR) and RingCentral (RNG). 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 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.
Both Sabre and RingCentral have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.
SABR currently has a forward P/E ratio of 14.53, while RNG has a forward P/E of 158.92. We also note that SABR has a PEG ratio of 2.35. 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. RNG currently has a PEG ratio of 5.28.
Another notable valuation metric for SABR is its P/B ratio of 6.73. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RNG has a P/B of 28.16.
Based on these metrics and many more, SABR holds a Value grade of B, while RNG has a Value grade of F.
Both SABR and RNG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SABR is the superior value option right now.
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