Investors looking for stocks in the Internet - Software sector might want to consider either Nice (NICE) or Autodesk (ADSK). 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 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, Nice is sporting a Zacks Rank of #2 (Buy), while Autodesk has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NICE has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
NICE currently has a forward P/E ratio of 8.76, while ADSK has a forward P/E of 16.50. We also note that NICE has a PEG ratio of 0.82. 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. ADSK currently has a PEG ratio of 0.98.
Another notable valuation metric for NICE is its P/B ratio of 1.54. 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, ADSK has a P/B of 13.73.
These metrics, and several others, help NICE earn a Value grade of A, while ADSK has been given a Value grade of C.
NICE has seen stronger estimate revision activity and sports more attractive valuation metrics than ADSK, so it seems like value investors will conclude that NICE is the superior option right now.
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This article originally published on Zacks Investment Research (zacks.com).