Investors with an interest in Media Conglomerates stocks have likely encountered both Walt Disney (DIS) and Pearson (PSO). 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Walt Disney and Pearson are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DIS has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DIS currently has a forward P/E ratio of 14.22, while PSO has a forward P/E of 18.37. We also note that DIS has a PEG ratio of 1.23. 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. PSO currently has a PEG ratio of 1.56.
Another notable valuation metric for DIS is its P/B ratio of 1.47. 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, PSO has a P/B of 2.22.
These are just a few of the metrics contributing to DIS's Value grade of B and PSO's Value grade of C.
DIS has seen stronger estimate revision activity and sports more attractive valuation metrics than PSO, so it seems like value investors will conclude that DIS is the superior option right now.
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The Walt Disney Company (DIS): Free Stock Analysis Report
Pearson, PLC (PSO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).