PYPL or PANW: Which Is the Better Value Stock Right Now?
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Investors looking for stocks in the Internet - Software sector might want to consider either Paypal (PYPL) or Palo Alto Networks (PANW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Paypal and Palo Alto Networks are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
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.
PYPL currently has a forward P/E ratio of 17.13, while PANW has a forward P/E of 57.66. We also note that PYPL has a PEG ratio of 1.39. 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. PANW currently has a PEG ratio of 2.98.
Another notable valuation metric for PYPL is its P/B ratio of 3.88. 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, PANW has a P/B of 22.74.
Based on these metrics and many more, PYPL holds a Value grade of B, while PANW has a Value grade of F.
Both PYPL and PANW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PYPL is the superior value option right now.
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PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
Palo Alto Networks, Inc. (PANW) : Free Stock Analysis Report