Investors interested in Internet - Software stocks are likely familiar with PagerDuty (PD) and F5 Networks (FFIV). 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 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.
PagerDuty has a Zacks Rank of #2 (Buy), while F5 Networks has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PD has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
PD currently has a forward P/E ratio of 7.93, while FFIV has a forward P/E of 24.53. We also note that PD has a PEG ratio of 1.18. 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. FFIV currently has a PEG ratio of 3.68.
Another notable valuation metric for PD is its P/B ratio of 3.67. 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, FFIV has a P/B of 5.9.
Based on these metrics and many more, PD holds a Value grade of A, while FFIV has a Value grade of D.
PD sticks out from FFIV in both our Zacks Rank and Style Scores models, so value investors will likely feel that PD is the better option right now.
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F5, Inc. (FFIV) : 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.
