Investors interested in stocks from the Internet - Software sector have probably already heard of Magnite (MGNI) and BlackLine (BL). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Magnite has a Zacks Rank of #2 (Buy), while BlackLine has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that MGNI likely has seen a stronger improvement to its earnings outlook than BL 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 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 12.06, while BL has a forward P/E of 16.17. We also note that MGNI has a PEG ratio of 0.44. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BL currently has a PEG ratio of 1.18.
Another notable valuation metric for MGNI is its P/B ratio of 1.98. 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, BL has a P/B of 6.91.
These metrics, and several others, help MGNI earn a Value grade of B, while BL has been given a Value grade of D.
MGNI has seen stronger estimate revision activity and sports more attractive valuation metrics than BL, so it seems like value investors will conclude that MGNI is the superior 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.
