Investors interested in stocks from the Leisure and Recreation Services sector have probably already heard of Carnival (CCL) and Trip.com (TCOM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, Carnival has a Zacks Rank of #2 (Buy), while Trip.com has a Zacks Rank of #3 (Hold). This means that CCL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
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.
CCL currently has a forward P/E ratio of 12.27, while TCOM has a forward P/E of 19.24. We also note that CCL has a PEG ratio of 0.54. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TCOM currently has a PEG ratio of 1.18.
Another notable valuation metric for CCL is its P/B ratio of 2.89. 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, TCOM has a P/B of 2,212.87.
Based on these metrics and many more, CCL holds a Value grade of A, while TCOM has a Value grade of C.
CCL 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 CCL is likely the superior value 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.
