Investors interested in stocks from the Broadcast Radio and Television sector have probably already heard of Gray Media (GTN) and Netflix (NFLX). 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.
Right now, Gray Media is sporting a Zacks Rank of #1 (Strong Buy), while Netflix has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that GTN likely has seen a stronger improvement to its earnings outlook than NFLX has recently. But this is just one factor that value investors are interested in.
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.
GTN currently has a forward P/E ratio of 1.96, while NFLX has a forward P/E of 19.57. We also note that GTN has a PEG ratio of 0.09. 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. NFLX currently has a PEG ratio of 0.99.
Another notable valuation metric for GTN is its P/B ratio of 0.22. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NFLX has a P/B of 9.71.
These metrics, and several others, help GTN earn a Value grade of A, while NFLX has been given a Value grade of D.
GTN 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 GTN is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).