Investors interested in stocks from the Financial - Miscellaneous Services sector have probably already heard of Synchrony (SYF) and Futu Holdings Limited Sponsored ADR (FUTU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Synchrony has a Zacks Rank of #2 (Buy), while Futu Holdings Limited Sponsored ADR has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SYF likely has seen a stronger improvement to its earnings outlook than FUTU has recently. However, value investors will care about much more than just this.
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.
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.
SYF currently has a forward P/E ratio of 7.84, while FUTU has a forward P/E of 11.16. We also note that SYF has a PEG ratio of 0.86. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FUTU currently has a PEG ratio of 1.04.
Another notable valuation metric for SYF is its P/B ratio of 1.63. 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, FUTU has a P/B of 2.94.
These metrics, and several others, help SYF earn a Value grade of A, while FUTU has been given a Value grade of C.
SYF 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 SYF is likely the superior value option right now.
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Synchrony Financial (SYF): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).