Investors with an interest in Internet - Software stocks have likely encountered both BlackLine (BL) and Autodesk (ADSK). 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.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both BlackLine and Autodesk have a Zacks Rank of #2 (Buy) right now. 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.
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.
BL currently has a forward P/E ratio of 13.26, while ADSK has a forward P/E of 18.97. We also note that BL has a PEG ratio of 0.97. 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. ADSK currently has a PEG ratio of 1.17.
Another notable valuation metric for BL is its P/B ratio of 5.67. 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, ADSK has a P/B of 16.27.
These metrics, and several others, help BL earn a Value grade of B, while ADSK has been given a Value grade of C.
Both BL and ADSK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BL is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).