Investors interested in Internet - Software stocks are likely familiar with StoneCo Ltd. (STNE) and BlackLine (BL). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
StoneCo Ltd. and BlackLine are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that STNE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
STNE currently has a forward P/E ratio of 20.46, while BL has a forward P/E of 60.24. We also note that STNE has a PEG ratio of 0.60. 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. BL currently has a PEG ratio of 1.63.
Another notable valuation metric for STNE is its P/B ratio of 1.47. 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, BL has a P/B of 29.38.
These are just a few of the metrics contributing to STNE's Value grade of A and BL's Value grade of F.
STNE stands above BL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that STNE is the superior value option right now.
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