Investors interested in stocks from the Securities and Exchanges sector have probably already heard of London Stock Exchange Group plc - Unsponsored ADR (LSEGY) and CME Group (CME). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Right now, London Stock Exchange Group plc - Unsponsored ADR is sporting a Zacks Rank of #2 (Buy), while CME Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LSEGY likely has seen a stronger improvement to its earnings outlook than CME has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
LSEGY currently has a forward P/E ratio of 21.18, while CME has a forward P/E of 24.93. We also note that LSEGY has a PEG ratio of 1.82. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CME currently has a PEG ratio of 4.32.
Another notable valuation metric for LSEGY is its P/B ratio of 1.98. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CME has a P/B of 3.55.
These metrics, and several others, help LSEGY earn a Value grade of B, while CME has been given a Value grade of D.
LSEGY 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 LSEGY 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.
