Investors looking for stocks in the Computer – Software sector might want to consider either Trend Micro Inc. (TMICY) or Ansys (ANSS). But which of these two companies is the best option for those looking for undervalued stocks? Let’s 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, Trend Micro Inc. is sporting a Zacks Rank of #2 (Buy), while Ansys has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TMICY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
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.
TMICY currently has a forward P/E ratio of 28.90, while ANSS has a forward P/E of 31.17. We also note that TMICY has a PEG ratio of 2.39. 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. ANSS currently has a PEG ratio of 2.71.
Another notable valuation metric for TMICY is its P/B ratio of 4.30. 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, ANSS has a P/B of 4.87.
Based on these metrics and many more, TMICY holds a Value grade of B, while ANSS has a Value grade of D.
TMICY sticks out from ANSS in both our Zacks Rank and Style Scores models, so value investors will likely feel that TMICY is the better option right now.
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