Investors interested in Internet – Services stocks are likely familiar with Autohome Inc. (ATHM) 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Autohome Inc. and Alphabet Inc. are sporting a Zacks Rank of # 2 (Buy). 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. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
ATHM currently has a forward P/E ratio of 12.56, while GOOG has a forward P/E of 28.81. We also note that ATHM has a PEG ratio of 0.77. 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. GOOG currently has a PEG ratio of 1.59.
Another notable valuation metric for ATHM is its P/B ratio of 2.41. 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, GOOG has a P/B of 7.53.
These are just a few of the metrics contributing to ATHM’s Value grade of B and GOOG’s Value grade of D.
Both ATHM and GOOG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ATHM is the superior value option right now.
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