Investors looking for stocks in the Internet - Software sector might want to consider either MiX Telematics Limited (MIXT) or Workday (WDAY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
MiX Telematics Limited and Workday are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MIXT has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
MIXT currently has a forward P/E ratio of 23.86, while WDAY has a forward P/E of 124.94. We also note that MIXT has a PEG ratio of 0.95. 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. WDAY currently has a PEG ratio of 4.
Another notable valuation metric for MIXT is its P/B ratio of 2.82. 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, WDAY has a P/B of 18.76.
Based on these metrics and many more, MIXT holds a Value grade of A, while WDAY has a Value grade of F.
MIXT has seen stronger estimate revision activity and sports more attractive valuation metrics than WDAY, so it seems like value investors will conclude that MIXT is the superior option right now.