Investors with an interest in Financial Transaction Services stocks have likely encountered both Evertec (EVTC) and Equifax (EFX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Evertec has a Zacks Rank of #1 (Strong Buy), while Equifax has a Zacks Rank of #3 (Hold). This means that EVTC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
EVTC currently has a forward P/E ratio of 11.25, while EFX has a forward P/E of 41.48. We also note that EVTC has a PEG ratio of 1.41. 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. EFX currently has a PEG ratio of 2.07.
Another notable valuation metric for EVTC is its P/B ratio of 4.49. 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, EFX has a P/B of 7.98.
These metrics, and several others, help EVTC earn a Value grade of B, while EFX has been given a Value grade of D.
EVTC 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 EVTC is likely the superior value option right now.
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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.
