Investors interested in Computer - Software stocks are likely familiar with Progress Software (PRGS) and 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.
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 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.
Right now, Progress Software is sporting a Zacks Rank of #2 (Buy), while Synopsys has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PRGS likely has seen a stronger improvement to its earnings outlook than SNPS has recently. But this is just one piece of the puzzle for value investors.
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.
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 4.56, while SNPS has a forward P/E of 33.35. We also note that PRGS has a PEG ratio of 0.91. 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 2.81.
Another notable valuation metric for PRGS is its P/B ratio of 2.3. 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 3.02.
Based on these metrics and many more, PRGS holds a Value grade of A, while SNPS has a Value grade of D.
PRGS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PRGS is likely the superior value option right now.
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Progress Software Corporation (PRGS): Free Stock Analysis Report
Synopsys, Inc. (SNPS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).