Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both Virtu Financial (VIRT) and American Express (AXP). 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 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.
Currently, Virtu Financial has a Zacks Rank of #2 (Buy), while American Express 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 VIRT is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
VIRT currently has a forward P/E ratio of 7.37, while AXP has a forward P/E of 18.54. We also note that VIRT has a PEG ratio of 0.35. 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. AXP currently has a PEG ratio of 1.40.
Another notable valuation metric for VIRT is its P/B ratio of 3.54. 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, AXP has a P/B of 6.23.
These metrics, and several others, help VIRT earn a Value grade of A, while AXP has been given a Value grade of C.
VIRT sticks out from AXP in both our Zacks Rank and Style Scores models, so value investors will likely feel that VIRT is the better option right now.
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Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
