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YY vs. YELP: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Nicolet Bankshares (NCBS) delivered earnings and revenue surprises of 21.43% and 25.34%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Investors looking for stocks in the Internet - Content sector might want to consider either YY (YY) or Yelp (YELP). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

YY has a Zacks Rank of #2 (Buy), while Yelp has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that YY likely has seen a stronger improvement to its earnings outlook than YELP has recently. But this is only part of the picture 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.

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.

YY currently has a forward P/E ratio of 8.49, while YELP has a forward P/E of 45.31. We also note that YY has a PEG ratio of 0.37. 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. YELP currently has a PEG ratio of 2.44.

Another notable valuation metric for YY is its P/B ratio of 1.45. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, YELP has a P/B of 3.09.

These metrics, and several others, help YY earn a Value grade of A, while YELP has been given a Value grade of D.

YY has seen stronger estimate revision activity and sports more attractive valuation metrics than YELP, so it seems like value investors will conclude that YY is the superior option right now.


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