PRGS vs. MSFT: Which Stock Is the Better Value Option?
Investors looking for stocks in the Computer - Software sector might want to consider either Progress Software (PRGS) or Microsoft (MSFT). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Progress Software has a Zacks Rank of #2 (Buy), while Microsoft has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PRGS is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PRGS currently has a forward P/E ratio of 6.80, while MSFT has a forward P/E of 25.19. We also note that PRGS has a PEG ratio of 1.36. 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. MSFT currently has a PEG ratio of 1.59.
Another notable valuation metric for PRGS is its P/B ratio of 3.39. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MSFT has a P/B of 8.27.
These are just a few of the metrics contributing to PRGS's Value grade of A and MSFT's Value grade of D.
PRGS has seen stronger estimate revision activity and sports more attractive valuation metrics than MSFT, so it seems like value investors will conclude that PRGS is the superior option right now.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
