Investors interested in Technology Services stocks are likely familiar with Skillsoft Corp. (SKIL) and AppLovin (APP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Currently, Skillsoft Corp. has a Zacks Rank of #1 (Strong Buy), while AppLovin has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SKIL likely has seen a stronger improvement to its earnings outlook than APP has recently. But this is only part of the picture for value investors.
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 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.
SKIL currently has a forward P/E ratio of 1.36, while APP has a forward P/E of 72.43. We also note that SKIL has a PEG ratio of 0.14. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. APP currently has a PEG ratio of 3.62.
Another notable valuation metric for SKIL is its P/B ratio of 12.38. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, APP has a P/B of 155.07.
These metrics, and several others, help SKIL earn a Value grade of A, while APP has been given a Value grade of D.
SKIL stands above APP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SKIL is the superior value option right now.
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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.
