Investors with an interest in Internet - Software stocks have likely encountered both Digital Turbine (APPS) and Autodesk (ADSK). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Digital Turbine is sporting a Zacks Rank of #1 (Strong Buy), while Autodesk has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that APPS likely has seen a stronger improvement to its earnings outlook than ADSK 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 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.
APPS currently has a forward P/E ratio of 10.25, while ADSK has a forward P/E of 15.41. We also note that APPS has a PEG ratio of 0.54. 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. ADSK currently has a PEG ratio of 0.92.
Another notable valuation metric for APPS is its P/B ratio of 5.38. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ADSK has a P/B of 12.82.
These are just a few of the metrics contributing to APPS's Value grade of B and ADSK's Value grade of C.
APPS stands above ADSK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that APPS is the superior value option right now.
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Autodesk, Inc. (ADSK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
