Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Orix (IX) or Futu Holdings Limited Sponsored ADR (FUTU). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Orix has a Zacks Rank of #2 (Buy), while Futu Holdings Limited Sponsored ADR has a Zacks Rank of #3 (Hold) right now. This means that IX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
IX currently has a forward P/E ratio of 7.06, while FUTU has a forward P/E of 13.20. We also note that IX has a PEG ratio of 0.71. 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. FUTU currently has a PEG ratio of 1.39.
Another notable valuation metric for IX is its P/B ratio of 1.43. 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, FUTU has a P/B of 3.49.
These are just a few of the metrics contributing to IX's Value grade of A and FUTU's Value grade of C.
IX 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 IX is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
