Investors interested in stocks from the Internet - Services sector have probably already heard of JOYY (YY) and Zscaler (ZS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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, JOYY is sporting a Zacks Rank of #2 (Buy), while Zscaler has a Zacks Rank of #3 (Hold). This means that YY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
YY currently has a forward P/E ratio of 15.26, while ZS has a forward P/E of 476.41. We also note that YY has a PEG ratio of 10.82. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ZS currently has a PEG ratio of 12.49.
Another notable valuation metric for YY is its P/B ratio of 0.78. 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, ZS has a P/B of 28.
These are just a few of the metrics contributing to YY's Value grade of A and ZS's Value grade of F.
YY 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 YY is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
YY Inc. (YY) : Free Stock Analysis Report
Zscaler, Inc. (ZS) : Free Stock Analysis Report
To read this article on Zacks.com click here.