Investors interested in stocks from the Internet - Software sector have probably already heard of ZoomInfo (GTM) and Zoom Communications (ZM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
ZoomInfo has a Zacks Rank of #2 (Buy), while Zoom Communications has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GTM has an improving earnings outlook. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
GTM currently has a forward P/E ratio of 3.31, while ZM has a forward P/E of 15.01. We also note that GTM has a PEG ratio of 0.43. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ZM currently has a PEG ratio of 2.96.
Another notable valuation metric for GTM is its P/B ratio of 1.32. 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, ZM has a P/B of 2.42.
These metrics, and several others, help GTM earn a Value grade of A, while ZM has been given a Value grade of C.
GTM stands above ZM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GTM is the superior value option right now.
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ZoomInfo Technologies Inc. (GTM): Free Stock Analysis Report
Zoom Communications, Inc. (ZM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).