Investors with an interest in Computer - Software stocks have likely encountered both Progress Software (PRGS) and Cadence Design Systems (CDNS). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Progress Software has a Zacks Rank of #2 (Buy), while Cadence Design Systems has a Zacks Rank of #3 (Hold). This means that PRGS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
PRGS currently has a forward P/E ratio of 6.59, while CDNS has a forward P/E of 41.59. We also note that PRGS has a PEG ratio of 1.32. 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. CDNS currently has a PEG ratio of 3.07.
Another notable valuation metric for PRGS is its P/B ratio of 3.29. 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, CDNS has a P/B of 13.88.
These metrics, and several others, help PRGS earn a Value grade of A, while CDNS has been given a Value grade of F.
PRGS 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 PRGS is likely the superior value option right now.
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Progress Software Corporation (PRGS): Free Stock Analysis Report
Cadence Design Systems, Inc. (CDNS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).