Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Orix (IX) or Futu Holdings Limited Sponsored ADR (FUTU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Orix and Futu Holdings Limited Sponsored ADR are sporting Zacks Ranks of #1 (Strong Buy) and #5 (Strong Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that IX is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
IX currently has a forward P/E ratio of 8.65, while FUTU has a forward P/E of 11.06. We also note that IX has a PEG ratio of 0.85. 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. FUTU currently has a PEG ratio of 1.16.
Another notable valuation metric for IX is its P/B ratio of 1.48. 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, FUTU has a P/B of 2.62.
These metrics, and several others, help IX earn a Value grade of A, while FUTU has been given a Value grade of D.
IX has seen stronger estimate revision activity and sports more attractive valuation metrics than FUTU, so it seems like value investors will conclude that IX is the superior 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.
