Investors interested in Internet - Commerce stocks are likely familiar with JD.com, Inc. (JD) and MONOTARO (MONOY). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
JD.com, Inc. has a Zacks Rank of #1 (Strong Buy), while MONOTARO has a Zacks Rank of #4 (Sell) right now. This means that JD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
JD currently has a forward P/E ratio of 49.84, while MONOY has a forward P/E of 86.16. We also note that JD has a PEG ratio of 1.07. 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. MONOY currently has a PEG ratio of 4.98.
Another notable valuation metric for JD is its P/B ratio of 7.37. 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, MONOY has a P/B of 30.38.
Based on these metrics and many more, JD holds a Value grade of B, while MONOY has a Value grade of D.
JD 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 JD is likely the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.