Investors interested in Technology Services stocks are likely familiar with V2X (VVX) and Duolingo, Inc. (DUOL). 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, V2X is sporting a Zacks Rank of #2 (Buy), while Duolingo, Inc. has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that VVX likely has seen a stronger improvement to its earnings outlook than DUOL 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.
VVX currently has a forward P/E ratio of 11.60, while DUOL has a forward P/E of 40.70. We also note that VVX has a PEG ratio of 0.59. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DUOL currently has a PEG ratio of 0.87.
Another notable valuation metric for VVX is its P/B ratio of 1.91. 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, DUOL has a P/B of 5.85.
Based on these metrics and many more, VVX holds a Value grade of A, while DUOL has a Value grade of C.
VVX sticks out from DUOL in both our Zacks Rank and Style Scores models, so value investors will likely feel that VVX is the better 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.