Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Futu Holdings Limited Sponsored ADR (FUTU) or Moody's (MCO). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.
Currently, Futu Holdings Limited Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Moody's has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FUTU has an improving earnings outlook. But this is only part of the picture for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FUTU currently has a forward P/E ratio of 13.16, while MCO has a forward P/E of 27.24. We also note that FUTU has a PEG ratio of 0.90. 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. MCO currently has a PEG ratio of 2.45.
Another notable valuation metric for FUTU is its P/B ratio of 4.25. 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, MCO has a P/B of 25.27.
These metrics, and several others, help FUTU earn a Value grade of B, while MCO has been given a Value grade of D.
FUTU sticks out from MCO in both our Zacks Rank and Style Scores models, so value investors will likely feel that FUTU is the better 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.
