WEX vs. V: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Financial Transaction Services sector have probably already heard of Wex (WEX) and Visa (V). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.

Wex and Visa are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that WEX has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

WEX currently has a forward P/E ratio of 8.05, while V has a forward P/E of 25.27. We also note that WEX has a PEG ratio of 0.83. 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. V currently has a PEG ratio of 1.82.

Another notable valuation metric for WEX is its P/B ratio of 4.11. 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, V has a P/B of 16.95.

These are just a few of the metrics contributing to WEX's Value grade of A and V's Value grade of D.

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

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

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