Investors interested in Internet - Software stocks are likely familiar with DocuSign (DOCU) and Autodesk (ADSK). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both DocuSign and Autodesk have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture 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.
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.
DOCU currently has a forward P/E ratio of 11.07, while ADSK has a forward P/E of 20.97. We also note that DOCU has a PEG ratio of 0.78. 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. ADSK currently has a PEG ratio of 1.23.
Another notable valuation metric for DOCU is its P/B ratio of 4.68. 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, ADSK has a P/B of 17.65.
Based on these metrics and many more, DOCU holds a Value grade of B, while ADSK has a Value grade of D.
Both DOCU and ADSK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DOCU is 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.
