STNE vs. BRZE: Which Stock Is the Better Value Option?

Investors looking for stocks in the Internet - Software sector might want to consider either StoneCo Ltd. (STNE) or Braze, Inc. (BRZE). 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.

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.

StoneCo Ltd. and Braze, Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STNE is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

STNE currently has a forward P/E ratio of 4.90, while BRZE has a forward P/E of 37.08. We also note that STNE has a PEG ratio of 0.21. 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. BRZE currently has a PEG ratio of 1.24.

Another notable valuation metric for STNE is its P/B ratio of 1.21. 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, BRZE has a P/B of 4.22.

These metrics, and several others, help STNE earn a Value grade of A, while BRZE has been given a Value grade of F.

STNE has seen stronger estimate revision activity and sports more attractive valuation metrics than BRZE, so it seems like value investors will conclude that STNE is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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