Investors interested in Internet - Software stocks are likely familiar with Five9 (FIVN) and Zoom Communications (ZM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Five9 and Zoom Communications are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that FIVN likely has seen a stronger improvement to its earnings outlook than ZM has recently. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
FIVN currently has a forward P/E ratio of 6.54, while ZM has a forward P/E of 14.24. We also note that FIVN has a PEG ratio of 0.40. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZM currently has a PEG ratio of 3.21.
Another notable valuation metric for FIVN is its P/B ratio of 1.97. 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, ZM has a P/B of 2.54.
These are just a few of the metrics contributing to FIVN's Value grade of A and ZM's Value grade of C.
FIVN stands above ZM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FIVN is the superior value option right now.
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Five9, Inc. (FIVN): Free Stock Analysis Report
Zoom Communications, Inc. (ZM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).