Investors looking for stocks in the Financial Transaction Services sector might want to consider either Paypal (PYPL) or MasterCard (MA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Paypal has a Zacks Rank of #2 (Buy), while MasterCard has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PYPL is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
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.
PYPL currently has a forward P/E ratio of 14.76, while MA has a forward P/E of 35.46. We also note that PYPL has a PEG ratio of 1.26. 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. MA currently has a PEG ratio of 2.42.
Another notable valuation metric for PYPL is its P/B ratio of 3.59. 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, MA has a P/B of 79.13.
These metrics, and several others, help PYPL earn a Value grade of B, while MA has been given a Value grade of D.
PYPL sticks out from MA in both our Zacks Rank and Style Scores models, so value investors will likely feel that PYPL is the better option right now.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
