Investors interested in stocks from the Internet - Content sector have probably already heard of China Distance (DL) and Yelp (YELP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, China Distance is sporting a Zacks Rank of #2 (Buy), while Yelp has a Zacks Rank of #3 (Hold). This means that DL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
DL currently has a forward P/E ratio of 8.61, while YELP has a forward P/E of 51.20. We also note that DL has a PEG ratio of 0.57. 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. YELP currently has a PEG ratio of 2.06.
Another notable valuation metric for DL is its P/B ratio of 1.38. 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, YELP has a P/B of 2.80.
These metrics, and several others, help DL earn a Value grade of A, while YELP has been given a Value grade of C.
DL has seen stronger estimate revision activity and sports more attractive valuation metrics than YELP, so it seems like value investors will conclude that DL is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report China Distance Education Holdings Limited (DL): Free Stock Analysis Report Yelp Inc. (YELP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research