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Investors interested in stocks from the Internet - Software and Services sector have probably already heard of 58.com Inc. (WUBA) and RingCentral (RNG). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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, 58.com Inc. has a Zacks Rank of #1 (Strong Buy), while RingCentral 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 WUBA 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.
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.
WUBA currently has a forward P/E ratio of 20.39, while RNG has a forward P/E of 310.03. We also note that WUBA has a PEG ratio of 0.98. 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. RNG currently has a PEG ratio of 16.45.
Another notable valuation metric for WUBA is its P/B ratio of 1.79. 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, RNG has a P/B of 50.62.
These metrics, and several others, help WUBA earn a Value grade of B, while RNG has been given a Value grade of F.
WUBA 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 WUBA is likely the superior value option right now.
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58.com Inc. (WUBA) : Free Stock Analysis Report
Ringcentral, Inc. (RNG) : Free Stock Analysis Report
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