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SAVE vs. CPA: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors interested in Transportation - Airline stocks are likely familiar with Spirit (SAVE) and Copa Holdings (CPA). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.

Currently, Spirit has a Zacks Rank of #1 (Strong Buy), while Copa Holdings has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SAVE is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

SAVE currently has a forward P/E ratio of 8.02, while CPA has a forward P/E of 11.20. We also note that SAVE has a PEG ratio of 0.49. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CPA currently has a PEG ratio of 0.71.

Another notable valuation metric for SAVE is its P/B ratio of 1.32. 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, CPA has a P/B of 2.27.

These metrics, and several others, help SAVE earn a Value grade of A, while CPA has been given a Value grade of C.

SAVE 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 SAVE is likely the superior value option right now.


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