Investors interested in stocks from the Internet - Software sector have probably already heard of DocuSign (DOCU) and Adyen N.V. Unsponsored ADR (ADYEY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
DocuSign has a Zacks Rank of #2 (Buy), while Adyen N.V. Unsponsored ADR has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that DOCU likely has seen a stronger improvement to its earnings outlook than ADYEY has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
DOCU currently has a forward P/E ratio of 10.61, while ADYEY has a forward P/E of 25.19. We also note that DOCU has a PEG ratio of 0.74. 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. ADYEY currently has a PEG ratio of 1.49.
Another notable valuation metric for DOCU is its P/B ratio of 4.48. 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, ADYEY has a P/B of 6.97.
Based on these metrics and many more, DOCU holds a Value grade of B, while ADYEY has a Value grade of F.
DOCU 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 DOCU is likely the superior value option right now.
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Adyen N.V. Unsponsored ADR (ADYEY) : 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.
