Investors looking for stocks in the Internet - Commerce sector might want to consider either Expedia (EXPE) or Zalando (ZLNDY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Expedia has a Zacks Rank of #1 (Strong Buy), while Zalando has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that EXPE likely has seen a stronger improvement to its earnings outlook than ZLNDY has recently. But this is just one factor that value investors are interested in.
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.
EXPE currently has a forward P/E ratio of 11.70, while ZLNDY has a forward P/E of 73.86. We also note that EXPE has a PEG ratio of 0.84. 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. ZLNDY currently has a PEG ratio of 4.86.
Another notable valuation metric for EXPE is its P/B ratio of 4.44. 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, ZLNDY has a P/B of 5.20.
Based on these metrics and many more, EXPE holds a Value grade of B, while ZLNDY has a Value grade of C.
EXPE stands above ZLNDY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EXPE is the superior value option right now.
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