Investors with an interest in Internet - Commerce stocks have likely encountered both Expedia (EXPE) and Amazon (AMZN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Expedia and Amazon are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. Investors should feel comfortable knowing that EXPE likely has seen a stronger improvement to its earnings outlook than AMZN 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.
EXPE currently has a forward P/E ratio of 21.83, while AMZN has a forward P/E of 100.58. We also note that EXPE has a PEG ratio of 1.36. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AMZN currently has a PEG ratio of 3.73.
Another notable valuation metric for EXPE is its P/B ratio of 3.19. 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, AMZN has a P/B of 24.94.
These are just a few of the metrics contributing to EXPE's Value grade of B and AMZN's Value grade of F.
EXPE 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 EXPE is likely the superior value 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 reportExpedia, Inc. (EXPE): Free Stock Analysis ReportAmazon.com, Inc. (AMZN): Free Stock Analysis ReportTo read this article on Zacks.com click here.