Investors interested in Communication - Components stocks are likely familiar with AudioCodes (AUDC) and Arista Networks (ANET). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
AudioCodes and Arista Networks are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
AUDC currently has a forward P/E ratio of 16.49, while ANET has a forward P/E of 29.97. We also note that AUDC has a PEG ratio of 0.66. 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. ANET currently has a PEG ratio of 1.60.
Another notable valuation metric for AUDC is its P/B ratio of 1.76. 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, ANET has a P/B of 9.76.
Based on these metrics and many more, AUDC holds a Value grade of B, while ANET has a Value grade of D.
Both AUDC and ANET are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AUDC is the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
