Investors looking for stocks in the Financial - Investment Bank sector might want to consider either Interactive Brokers Group, Inc. (IBKR) or Robinhood Markets, Inc. (HOOD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Right now, Interactive Brokers Group, Inc. is sporting a Zacks Rank of #2 (Buy), while Robinhood Markets, Inc. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that IBKR 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.
IBKR currently has a forward P/E ratio of 34.24, while HOOD has a forward P/E of 69.10. We also note that IBKR has a PEG ratio of 2.15. 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. HOOD currently has a PEG ratio of 3.05.
Another notable valuation metric for IBKR is its P/B ratio of 6.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HOOD has a P/B of 14.35.
These are just a few of the metrics contributing to IBKR's Value grade of B and HOOD's Value grade of F.
IBKR sticks out from HOOD in both our Zacks Rank and Style Scores models, so value investors will likely feel that IBKR 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.
