Investors interested in stocks from the Technology Services sector have probably already heard of Acuity (AYI) and Duolingo, Inc. (DUOL). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Acuity is sporting a Zacks Rank of #1 (Strong Buy), while Duolingo, Inc. has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AYI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
AYI currently has a forward P/E ratio of 18.52, while DUOL has a forward P/E of 107.94. We also note that AYI has a PEG ratio of 1.85. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DUOL currently has a PEG ratio of 2.25.
Another notable valuation metric for AYI is its P/B ratio of 4.12. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DUOL has a P/B of 15.98.
These metrics, and several others, help AYI earn a Value grade of B, while DUOL has been given a Value grade of D.
AYI 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 AYI is likely the superior value option right now.
Free Report: Profiting from the 2nd Wave of AI Explosion
The next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.
Investors who bought shares like Nvidia at the right time have had a shot at huge gains.
But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.
Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.
Access AI Boom 2.0 now, absolutely free >>Acuity, Inc. (AYI) : Free Stock Analysis Report
Duolingo, Inc. (DUOL) : 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.
