Investors interested in stocks from the Technology Services sector have probably already heard of Parsons (PSN) and AppLovin (APP). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Parsons and AppLovin are both sporting a Zacks Rank of # 2 (Buy) right now. 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. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PSN currently has a forward P/E ratio of 26.18, while APP has a forward P/E of 44.42. We also note that PSN has a PEG ratio of 1.95. 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 2.22.
Another notable valuation metric for PSN is its P/B ratio of 2.90. 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, APP has a P/B of 11.96.
These metrics, and several others, help PSN earn a Value grade of B, while APP has been given a Value grade of C.
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.
