CRM vs. ADYEY: Which Stock Should Value Investors Buy Now?

Investors looking for stocks in the Internet - Software sector might want to consider either Salesforce (CRM) or Adyen N.V. Unsponsored ADR (ADYEY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Salesforce is sporting a Zacks Rank of #2 (Buy), while Adyen N.V. Unsponsored ADR 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 CRM has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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.

CRM currently has a forward P/E ratio of 12.31, while ADYEY has a forward P/E of 20.82. We also note that CRM has a PEG ratio of 0.68. 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. ADYEY currently has a PEG ratio of 1.25.

Another notable valuation metric for CRM is its P/B ratio of 4.16. 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, ADYEY has a P/B of 5.48.

These metrics, and several others, help CRM earn a Value grade of B, while ADYEY has been given a Value grade of D.

CRM sticks out from ADYEY in both our Zacks Rank and Style Scores models, so value investors will likely feel that CRM is the better option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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