Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Principal Financial (PFG) and Virtus Investment Partners (VRTS). 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.
Both Principal Financial and Virtus Investment Partners have a Zacks Rank of # 1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
PFG currently has a forward P/E ratio of 7.80, while VRTS has a forward P/E of 9.05. We also note that PFG has a PEG ratio of 1.19. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. VRTS currently has a PEG ratio of 1.81.
Another notable valuation metric for PFG is its P/B ratio of 0.76. 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, VRTS has a P/B of 1.61.
Based on these metrics and many more, PFG holds a Value grade of A, while VRTS has a Value grade of F.
Both PFG and VRTS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PFG is the superior value option right now.
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Principal Financial Group, Inc. (PFG): Free Stock Analysis Report
Virtus Investment Partners, Inc. (VRTS): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.