Investors looking for stocks in the Computer - Software sector might want to consider either Progress Software (PRGS) or Synopsys (SNPS). 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.
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.
Progress Software has a Zacks Rank of #2 (Buy), while Synopsys has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PRGS is likely seeing its earnings outlook improve to a greater extent. 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.
PRGS currently has a forward P/E ratio of 4.88, while SNPS has a forward P/E of 34.42. We also note that PRGS has a PEG ratio of 0.98. 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. SNPS currently has a PEG ratio of 2.90.
Another notable valuation metric for PRGS is its P/B ratio of 2.46. 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, SNPS has a P/B of 3.13.
These metrics, and several others, help PRGS earn a Value grade of A, while SNPS has been given a Value grade of D.
PRGS has seen stronger estimate revision activity and sports more attractive valuation metrics than SNPS, so it seems like value investors will conclude that PRGS is the superior option right now.
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Progress Software Corporation (PRGS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).