Investors interested in Internet – Commerce stocks are likely familiar with Expedia (EXPE) and Zalando (ZLNDY). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Expedia has a Zacks Rank of #2 (Buy), while Zalando has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EXPE is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
EXPE currently has a forward P/E ratio of 11.81, while ZLNDY has a forward P/E of 112.53. We also note that EXPE has a PEG ratio of 0.84. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. ZLNDY currently has a PEG ratio of 11.96.
Another notable valuation metric for EXPE is its P/B ratio of 3.71. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ZLNDY has a P/B of 4.03.
Based on these metrics and many more, EXPE holds a Value grade of A, while ZLNDY has a Value grade of C.
EXPE has seen stronger estimate revision activity and sports more attractive valuation metrics than ZLNDY, so it seems like value investors will conclude that EXPE is the superior option right now.
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