Investors looking for stocks in the Internet - Software sector might want to consider either BILL Holdings (BILL) or Palantir Technologies Inc. (PLTR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both BILL Holdings and Palantir Technologies Inc. have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BILL currently has a forward P/E ratio of 13.39, while PLTR has a forward P/E of 88.98. We also note that BILL has a PEG ratio of 0.45. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PLTR currently has a PEG ratio of 1.67.
Another notable valuation metric for BILL is its P/B ratio of 0.9. 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, PLTR has a P/B of 37.13.
These metrics, and several others, help BILL earn a Value grade of B, while PLTR has been given a Value grade of F.
Both BILL and PLTR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BILL is the superior value option right now.
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BILL Holdings, Inc. (BILL): Free Stock Analysis Report
Palantir Technologies Inc. (PLTR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).