Investors looking for stocks in the Internet - Commerce sector might want to consider either Commerce.com (CMRC) or eBay (EBAY). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Commerce.com and eBay 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 CMRC has an improving earnings outlook. 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 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.
CMRC currently has a forward P/E ratio of 6.83, while EBAY has a forward P/E of 15.92. We also note that CMRC has a PEG ratio of 0.27. 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. EBAY currently has a PEG ratio of 1.61.
Another notable valuation metric for CMRC is its P/B ratio of 5.46. 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, EBAY has a P/B of 9.34.
These are just a few of the metrics contributing to CMRC's Value grade of B and EBAY's Value grade of D.
CMRC 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 CMRC is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).