Investors with an interest in Internet - Content stocks have likely encountered both YY (YY) and Yelp (YELP). But which of these two stocks presents investors with the better value opportunity right now? 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.
Currently, both YY and Yelp are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 7.88, while YELP has a forward P/E of 33.32. We also note that YY has a PEG ratio of 0.35. 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. YELP currently has a PEG ratio of 1.69.
Another notable valuation metric for YY is its P/B ratio of 1.31. 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, YELP has a P/B of 3.35.
Based on these metrics and many more, YY holds a Value grade of A, while YELP has a Value grade of D.
Both YY and YELP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that YY is the superior value option right now.
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