Investors interested in Internet - Software and Services stocks are likely familiar with Globant (GLOB) and NetEase (NTES). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Globant and NetEase are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
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.
GLOB currently has a forward P/E ratio of 12.97, while NTES has a forward P/E of 15.82. We also note that GLOB has a PEG ratio of 2.49. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NTES currently has a PEG ratio of 4.21.
Another notable valuation metric for GLOB is its P/B ratio of 1.65. 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, NTES has a P/B of 4.2.
These are just a few of the metrics contributing to GLOB's Value grade of B and NTES's Value grade of C.
Both GLOB and NTES are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GLOB is the superior value option right now.
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NetEase, Inc. (NTES) : 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.
