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AXP or MCO: Which Is the Better Value Stock Right Now?

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Investors interested in stocks from the Financial - Miscellaneous Services sector have probably already heard of American Express (AXP - Free Report) and Moody's (MCO - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, American Express is sporting a Zacks Rank of #2 (Buy), while Moody's has a Zacks Rank of #4 (Sell). This means that AXP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

AXP currently has a forward P/E ratio of 17.03, while MCO has a forward P/E of 35.29. We also note that AXP has a PEG ratio of 1.23. 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. MCO currently has a PEG ratio of 3.01.

Another notable valuation metric for AXP is its P/B ratio of 5.62. 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, MCO has a P/B of 19.88.

These metrics, and several others, help AXP earn a Value grade of B, while MCO has been given a Value grade of F.

AXP stands above MCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AXP is the superior value option right now.


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