Investors interested in stocks from the Internet - Software sector have probably already heard of BILL Holdings (BILL) and Datadog (DDOG). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.
Currently, BILL Holdings has a Zacks Rank of #2 (Buy), while Datadog 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 BILL has an improving earnings outlook. But this is only part of the picture 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 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.
BILL currently has a forward P/E ratio of 15.53, while DDOG has a forward P/E of 67.67. We also note that BILL has a PEG ratio of 0.82. 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. DDOG currently has a PEG ratio of 7.73.
Another notable valuation metric for BILL is its P/B ratio of 0.96. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, DDOG has a P/B of 13.57.
These are just a few of the metrics contributing to BILL's Value grade of B and DDOG's Value grade of F.
BILL stands above DDOG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BILL is the superior value option right now.
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BILL Holdings, Inc. (BILL): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).