Investors interested in Internet - Commerce stocks are likely familiar with Stamps.com (STMP) and ZALANDO SE ADRS (ZLNDY). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Stamps.com is sporting a Zacks Rank of #1 (Strong Buy), while ZALANDO SE ADRS has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STMP has an improving earnings outlook. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
STMP currently has a forward P/E ratio of 17.72, while ZLNDY has a forward P/E of 124.72. We also note that STMP has a PEG ratio of 1.18. 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. ZLNDY currently has a PEG ratio of 6.24.
Another notable valuation metric for STMP is its P/B ratio of 2.09. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ZLNDY has a P/B of 6.57.
These metrics, and several others, help STMP earn a Value grade of B, while ZLNDY has been given a Value grade of D.
STMP has seen stronger estimate revision activity and sports more attractive valuation metrics than ZLNDY, so it seems like value investors will conclude that STMP is the superior option right now.
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