Investors interested in Technology Services stocks are likely familiar with Kyndryl Holdings, Inc. (KD) and AppLovin (APP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Kyndryl Holdings, Inc. has a Zacks Rank of #1 (Strong Buy), while AppLovin has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that KD likely has seen a stronger improvement to its earnings outlook than APP has recently. 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 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.
KD currently has a forward P/E ratio of 19.69, while APP has a forward P/E of 42.03. We also note that KD has a PEG ratio of 0.79. 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. APP currently has a PEG ratio of 2.10.
Another notable valuation metric for KD is its P/B ratio of 7.49. 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, APP has a P/B of 207.42.
These metrics, and several others, help KD earn a Value grade of A, while APP has been given a Value grade of D.
KD 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 KD 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.
