Investors interested in stocks from the Internet – Services sector have probably already heard of Trivago N.V. ADS (TRVG) and Alphabet Inc. (GOOG). 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.
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.
Right now, Trivago N.V. ADS is sporting a Zacks Rank of #2 (Buy), while Alphabet Inc. has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that TRVG likely has seen a stronger improvement to its earnings outlook than GOOG has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
TRVG currently has a forward P/E ratio of 13.50, while GOOG has a forward P/E of 18.79. We also note that TRVG has a PEG ratio of 0.93. 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. GOOG currently has a PEG ratio of 1.67.
Another notable valuation metric for TRVG is its P/B ratio of 0.85. 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, GOOG has a P/B of 4.49.
These metrics, and several others, help TRVG earn a Value grade of A, while GOOG has been given a Value grade of C.
TRVG stands above GOOG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TRVG is the superior value option right now.
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