Investors interested in stocks from the Internet - Software sector have probably already heard of PagerDuty (PD) and F5 Networks (FFIV). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both PagerDuty and F5 Networks are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PD currently has a forward P/E ratio of 6.58, while FFIV has a forward P/E of 23.47. We also note that PD has a PEG ratio of 0.98. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FFIV currently has a PEG ratio of 3.52.
Another notable valuation metric for PD is its P/B ratio of 3.05. 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, FFIV has a P/B of 5.98.
These are just a few of the metrics contributing to PD's Value grade of A and FFIV's Value grade of D.
Both PD and FFIV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PD is the superior value option right now.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PagerDuty (PD): Free Stock Analysis Report
F5, Inc. (FFIV): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).