Investors looking for stocks in the Gaming sector might want to consider either Churchill Downs (CHDN) or Take-Two Interactive (TTWO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Churchill Downs and Take-Two Interactive are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CHDN likely has seen a stronger improvement to its earnings outlook than TTWO has recently. But this is just one piece of the puzzle for value investors.
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.
CHDN currently has a forward P/E ratio of 18.65, while TTWO has a forward P/E of 75.11. We also note that CHDN has a PEG ratio of 1.91. 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. TTWO currently has a PEG ratio of 2.17.
Another notable valuation metric for CHDN is its P/B ratio of 7.85. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TTWO has a P/B of 13.28.
These metrics, and several others, help CHDN earn a Value grade of B, while TTWO has been given a Value grade of D.
CHDN 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 CHDN 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.
