Investors looking for stocks in the Internet - Software sector might want to consider either j2 Global (JCOM) or Paypal (PYPL). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, j2 Global is sporting a Zacks Rank of #2 (Buy), while Paypal 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 JCOM 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 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.
JCOM currently has a forward P/E ratio of 13.99, while PYPL has a forward P/E of 59.72. We also note that JCOM has a PEG ratio of 1.75. 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. PYPL currently has a PEG ratio of 2.75.
Another notable valuation metric for JCOM is its P/B ratio of 4.74. 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, PYPL has a P/B of 15.86.
Based on these metrics and many more, JCOM holds a Value grade of B, while PYPL has a Value grade of D.
JCOM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that JCOM is likely the superior value option right now.
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