Investors looking for stocks in the Consumer Services - Miscellaneous sector might want to consider either SP Plus (SP) or Care.com (CRCM). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both SP Plus and Care.com are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
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.
SP currently has a forward P/E ratio of 16.75, while CRCM has a forward P/E of 25.38. We also note that SP has a PEG ratio of 1.67. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CRCM currently has a PEG ratio of 1.69.
Another notable valuation metric for SP is its P/B ratio of 2.79. 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, CRCM has a P/B of 3.78.
These are just a few of the metrics contributing to SP's Value grade of B and CRCM's Value grade of C.
Both SP and CRCM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SP is the superior value option right now.
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