Investors with an interest in Financial Transaction Services stocks have likely encountered both Total System Services (TSS) and MasterCard (MA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Total System Services has a Zacks Rank of #2 (Buy), while MasterCard has a Zacks Rank of #3 (Hold) right now. This means that TSS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TSS currently has a forward P/E ratio of 22, while MA has a forward P/E of 32.95. We also note that TSS has a PEG ratio of 1.50. 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. MA currently has a PEG ratio of 1.73.
Another notable valuation metric for TSS is its P/B ratio of 7.03. 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, MA has a P/B of 41.56.
These are just a few of the metrics contributing to TSS's Value grade of B and MA's Value grade of C.
TSS has seen stronger estimate revision activity and sports more attractive valuation metrics than MA, so it seems like value investors will conclude that TSS 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 Total System Services, Inc. (TSS): Free Stock Analysis Report Mastercard Incorporated (MA): Free Stock Analysis Report To read this article on Zacks.com click here.