Investors with an interest in Gaming stocks have likely encountered both Boyd Gaming (BYD) and Take-Two Interactive (TTWO). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Boyd Gaming and Take-Two Interactive are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BYD likely has seen a stronger improvement to its earnings outlook than TTWO 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.
BYD currently has a forward P/E ratio of 11.46, while TTWO has a forward P/E of 78.35. We also note that BYD has a PEG ratio of 2.18. 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. TTWO currently has a PEG ratio of 2.27.
Another notable valuation metric for BYD is its P/B ratio of 2.59. 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, TTWO has a P/B of 13.85.
These metrics, and several others, help BYD earn a Value grade of A, while TTWO has been given a Value grade of F.
BYD sticks out from TTWO in both our Zacks Rank and Style Scores models, so value investors will likely feel that BYD is the better option right now.
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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.
