Investors interested in stocks from the Internet - Commerce sector have probably already heard of Solo Brands, Inc. (DTC) and MercadoLibre (MELI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Solo Brands, Inc. has a Zacks Rank of #2 (Buy), while MercadoLibre has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DTC is likely seeing its earnings outlook improve to a greater extent. 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.
DTC currently has a forward P/E ratio of 5.51, while MELI has a forward P/E of 52.10. We also note that DTC has a PEG ratio of 0.47. 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. MELI currently has a PEG ratio of 1.29.
Another notable valuation metric for DTC is its P/B ratio of 0.62. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MELI has a P/B of 26.34.
Based on these metrics and many more, DTC holds a Value grade of A, while MELI has a Value grade of C.
DTC 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 DTC is likely the superior value option right now.
Solo Brands, Inc. (DTC) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
