Investors with an interest in Internet - Commerce stocks have likely encountered both Expedia (EXPE) and Chewy (CHWY). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Expedia and Chewy are sporting a Zacks Rank of # 1 (Strong Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
EXPE currently has a forward P/E ratio of 11.17, while CHWY has a forward P/E of 25.79. We also note that EXPE has a PEG ratio of 0.39. 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. CHWY currently has a PEG ratio of 0.87.
Another notable valuation metric for EXPE is its P/B ratio of 8.47. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CHWY has a P/B of 16.82.
These metrics, and several others, help EXPE earn a Value grade of A, while CHWY has been given a Value grade of C.
Both EXPE and CHWY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EXPE is 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.
