APPS or SPOT: Which Is the Better Value Stock Right Now?
Investors interested in Internet - Software stocks are likely familiar with Digital Turbine (APPS) and Spotify (SPOT). 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Currently, Digital Turbine has a Zacks Rank of #2 (Buy), while Spotify has a Zacks Rank of #3 (Hold). This means that APPS'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.
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.
APPS currently has a forward P/E ratio of 12.74, while SPOT has a forward P/E of 37.21. We also note that APPS has a PEG ratio of 0.41. 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. SPOT currently has a PEG ratio of 1.56.
Another notable valuation metric for APPS is its P/B ratio of 6.96. 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, SPOT has a P/B of 11.17.
Based on these metrics and many more, APPS holds a Value grade of B, while SPOT has a Value grade of D.
APPS sticks out from SPOT in both our Zacks Rank and Style Scores models, so value investors will likely feel that APPS is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
