Investors interested in stocks from the Internet - Commerce sector have probably already heard of JD.com, Inc. (JD) and MercadoLibre (MELI). 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, JD.com, Inc. is sporting a Zacks Rank of #1 (Strong Buy), while MercadoLibre has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that JD likely has seen a stronger improvement to its earnings outlook than MELI has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
JD currently has a forward P/E ratio of 7.19, while MELI has a forward P/E of 59.81. We also note that JD has a PEG ratio of 0.41. 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. MELI currently has a PEG ratio of 1.37.
Another notable valuation metric for JD is its P/B ratio of 1.14. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MELI has a P/B of 29.17.
These metrics, and several others, help JD earn a Value grade of A, while MELI has been given a Value grade of C.
JD has seen stronger estimate revision activity and sports more attractive valuation metrics than MELI, so it seems like value investors will conclude that JD is the superior option right now.
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See This Stock Now for Free >>JD.com, Inc. (JD) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
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