Investors interested in Internet - Software stocks are likely familiar with PagerDuty (PD) and Autodesk (ADSK). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both PagerDuty and Autodesk are sporting a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
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.
PD currently has a forward P/E ratio of 5.94, while ADSK has a forward P/E of 20.18. We also note that PD has a PEG ratio of 0.88. 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 1.25.
Another notable valuation metric for PD is its P/B ratio of 2.51. 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, ADSK has a P/B of 17.31.
These metrics, and several others, help PD earn a Value grade of A, while ADSK has been given a Value grade of D.
Both PD and ADSK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PD is the superior value option right now.
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See Our Newest 5 Stocks Set to Double Picks >>PagerDuty (PD) : Free Stock Analysis Report
Autodesk, Inc. (ADSK) : Free Stock Analysis Report
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.
