Investors interested in stocks from the Internet - Software sector have probably already heard of Magnite (MGNI) and Autodesk (ADSK). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Magnite and Autodesk are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
MGNI currently has a forward P/E ratio of 11.27, while ADSK has a forward P/E of 19.23. We also note that MGNI 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. ADSK currently has a PEG ratio of 1.19.
Another notable valuation metric for MGNI is its P/B ratio of 1.85. 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, ADSK has a P/B of 16.5.
These metrics, and several others, help MGNI earn a Value grade of B, while ADSK has been given a Value grade of D.
Both MGNI and ADSK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MGNI is 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.
