Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Inter & Co. Inc. (INTR) or Upstart Holdings, Inc. (UPST). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Inter & Co. Inc. has a Zacks Rank of #2 (Buy), while Upstart Holdings, Inc. 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 INTR has an improving earnings outlook. But this is just one piece of the puzzle 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
INTR currently has a forward P/E ratio of 10.83, while UPST has a forward P/E of 14.79. We also note that INTR has a PEG ratio of 0.34. 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. UPST currently has a PEG ratio of 0.39.
Another notable valuation metric for INTR is its P/B ratio of 1.94. 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, UPST has a P/B of 4.25.
These metrics, and several others, help INTR earn a Value grade of A, while UPST has been given a Value grade of D.
INTR 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 INTR is likely the superior value 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.
