Investors looking for stocks in the Financial Transaction Services sector might want to consider either Wex (WEX) or Visa (V). 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, both Wex and Visa are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle 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 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.
WEX currently has a forward P/E ratio of 9.35, while V has a forward P/E of 27.21. We also note that WEX has a PEG ratio of 0.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. V currently has a PEG ratio of 1.92.
Another notable valuation metric for WEX is its P/B ratio of 4.75. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, V has a P/B of 21.
These metrics, and several others, help WEX earn a Value grade of A, while V has been given a Value grade of D.
Both WEX and V are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WEX is the superior value option right now.
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WEX Inc. (WEX): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).