Investors looking for stocks in the Internet – Software sector might want to consider either Paypal (PYPL) or Smartsheet (SMAR). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Paypal has a Zacks Rank of #1 (Strong Buy), while Smartsheet has a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PYPL has an improving earnings outlook. 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.
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.
PYPL currently has a forward P/E ratio of 16.40, while SMAR has a forward P/E of 38.81. We also note that PYPL has a PEG ratio of 1.03. 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. SMAR currently has a PEG ratio of 1.15.
Another notable valuation metric for PYPL is its P/B ratio of 3.59. 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, SMAR has a P/B of 10.64.
Based on these metrics and many more, PYPL holds a Value grade of B, while SMAR has a Value grade of D.
PYPL sticks out from SMAR in both our Zacks Rank and Style Scores models, so value investors will likely feel that PYPL is the better option right now.
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PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
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