Investors interested in stocks from the Internet - Services sector have probably already heard of HealthStream (HSTM) and Sify Technologies Limited (SIFY). 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, HealthStream is sporting a Zacks Rank of #2 (Buy), while Sify Technologies Limited has a Zacks Rank of #3 (Hold). This means that HSTM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
HSTM currently has a forward P/E ratio of 33.97, while SIFY has a forward P/E of 841.00. We also note that HSTM has a PEG ratio of 2.83. 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. SIFY currently has a PEG ratio of 42.05.
Another notable valuation metric for HSTM is its P/B ratio of 2.09. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SIFY has a P/B of 5.53.
These are just a few of the metrics contributing to HSTM's Value grade of B and SIFY's Value grade of C.
HSTM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HSTM is likely the superior value option right now.
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HealthStream, Inc. (HSTM): Free Stock Analysis Report
Sify Technologies Limited (SIFY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).