Investors interested in Technology Services stocks are likely familiar with Parsons (PSN) and AppLovin (APP). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Parsons and AppLovin are holding a Zacks Rank of # 2 (Buy). 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.
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.
PSN currently has a forward P/E ratio of 26.36, while APP has a forward P/E of 50.33. We also note that PSN has a PEG ratio of 1.96. 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. APP currently has a PEG ratio of 2.52.
Another notable valuation metric for PSN is its P/B ratio of 2.92. 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, APP has a P/B of 13.90.
These metrics, and several others, help PSN earn a Value grade of B, while APP has been given a Value grade of D.
Both PSN and APP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PSN is the superior value option right now.
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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.
