PAGS or KLAR: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Financial Transaction Services sector might want to consider either PagSeguro Digital Ltd. (PAGS) or Klarna (KLAR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both PagSeguro Digital Ltd. and Klarna are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

PAGS currently has a forward P/E ratio of 5.29, while KLAR has a forward P/E of 415.77. We also note that PAGS has a PEG ratio of 0.36. 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. KLAR currently has a PEG ratio of 7.92.

Another notable valuation metric for PAGS is its P/B ratio of 0.91. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, KLAR has a P/B of 2.33.

These metrics, and several others, help PAGS earn a Value grade of A, while KLAR has been given a Value grade of F.

Both PAGS and KLAR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PAGS is the superior value option right now.

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

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