Investors interested in Financial - Miscellaneous Services stocks are likely familiar with Virtu Financial (VIRT) and Moody's (MCO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.
Right now, Virtu Financial is sporting a Zacks Rank of #1 (Strong Buy), while Moody's has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that VIRT likely has seen a stronger improvement to its earnings outlook than MCO has recently. However, value investors will care about much more than just this.
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.
VIRT currently has a forward P/E ratio of 8.80, while MCO has a forward P/E of 37.62. We also note that VIRT has a PEG ratio of 0.51. 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. MCO currently has a PEG ratio of 3.34.
Another notable valuation metric for VIRT is its P/B ratio of 3.91. 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, MCO has a P/B of 22.72.
Based on these metrics and many more, VIRT holds a Value grade of A, while MCO has a Value grade of F.
VIRT stands above MCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VIRT is the superior value option right now.
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Moody's Corporation (MCO) : Free Stock Analysis Report
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.
