Investors interested in stocks from the Broadcast Radio and Television sector have probably already heard of Sirius XM (SIRI) and Netflix (NFLX). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Sirius XM has a Zacks Rank of #2 (Buy), while Netflix has a Zacks Rank of #3 (Hold) right now. This means that SIRI'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 analyze a variety of traditional, tried-and-true metrics to help find companies 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.
SIRI currently has a forward P/E ratio of 8.63, while NFLX has a forward P/E of 25.88. We also note that SIRI has a PEG ratio of 0.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NFLX currently has a PEG ratio of 1.18.
Another notable valuation metric for SIRI is its P/B ratio of 0.78. 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, NFLX has a P/B of 12.46.
These metrics, and several others, help SIRI earn a Value grade of A, while NFLX has been given a Value grade of D.
SIRI stands above NFLX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SIRI is the superior value option right now.
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Sirius XM Holdings Inc. (SIRI): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).