Investors looking for stocks in the Securities and Exchanges sector might want to consider either London Stock Exchange Group plc - Unsponsored ADR (LSEGY) or CME Group (CME). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, London Stock Exchange Group plc - Unsponsored ADR has a Zacks Rank of #2 (Buy), while CME Group has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LSEGY has an improving earnings outlook. But this is just one piece of the puzzle 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.
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.
LSEGY currently has a forward P/E ratio of 21.99, while CME has a forward P/E of 23.90. We also note that LSEGY has a PEG ratio of 1.89. 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. CME currently has a PEG ratio of 3.97.
Another notable valuation metric for LSEGY is its P/B ratio of 2.05. 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, CME has a P/B of 3.4.
These are just a few of the metrics contributing to LSEGY's Value grade of B and CME's 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.
