Investors interested in Gaming stocks are likely familiar with Churchill Downs (CHDN) and Take-Two Interactive (TTWO). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Right now, both Churchill Downs and Take-Two Interactive are sporting a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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.
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.
CHDN currently has a forward P/E ratio of 13.60, while TTWO has a forward P/E of 26.61. We also note that CHDN has a PEG ratio of 0.66. 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. TTWO currently has a PEG ratio of 2.66.
Another notable valuation metric for CHDN is its P/B ratio of 6.33. 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, TTWO has a P/B of 11.28.
Based on these metrics and many more, CHDN holds a Value grade of A, while TTWO has a Value grade of D.
Both CHDN and TTWO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CHDN is the superior value option right now.
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Churchill Downs, Incorporated (CHDN): Free Stock Analysis Report
Take-Two Interactive Software, Inc. (TTWO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).