Investors interested in Leisure and Recreation Services stocks are likely familiar with Atour Lifestyle Holdings Limited Sponsored ADR (ATAT) and Airbnb, Inc. (ABNB). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Atour Lifestyle Holdings Limited Sponsored ADR is sporting a Zacks Rank of #2 (Buy), while Airbnb, Inc. has a Zacks Rank of #3 (Hold). This means that ATAT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
ATAT currently has a forward P/E ratio of 17.57, while ABNB has a forward P/E of 26.69. We also note that ATAT has a PEG ratio of 0.90. 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. ABNB currently has a PEG ratio of 1.41.
Another notable valuation metric for ATAT is its P/B ratio of 9.44. 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, ABNB has a P/B of 10.35.
These are just a few of the metrics contributing to ATAT's Value grade of B and ABNB's Value grade of D.
ATAT stands above ABNB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ATAT is the superior value option right now.
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Atour Lifestyle Holdings Limited Sponsored ADR (ATAT): Free Stock Analysis Report
Airbnb, Inc. (ABNB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).