Investors looking for stocks in the Financial Transaction Services sector might want to consider either Corpay (CPAY) or MasterCard (MA). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Corpay and MasterCard are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CPAY'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 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.
CPAY currently has a forward P/E ratio of 12.88, while MA has a forward P/E of 26.51. We also note that CPAY has a PEG ratio of 0.90. 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. MA currently has a PEG ratio of 1.62.
Another notable valuation metric for CPAY is its P/B ratio of 6.62. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MA has a P/B of 68.33.
Based on these metrics and many more, CPAY holds a Value grade of B, while MA has a Value grade of D.
CPAY 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 CPAY is likely the superior value option right now.
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Corpay, Inc. (CPAY): Free Stock Analysis Report
Mastercard Incorporated (MA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).