Investors interested in Broadcast Radio and Television stocks are likely familiar with Gray Television (GTN - Free Report) and Netflix (NFLX - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Right now, Gray Television is sporting a Zacks Rank of #2 (Buy), while Netflix has a Zacks Rank of #3 (Hold). This means that GTN'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 try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
GTN currently has a forward P/E ratio of 5.39, while NFLX has a forward P/E of 78.96. We also note that GTN has a PEG ratio of 0.54. 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. NFLX currently has a PEG ratio of 2.63.
Another notable valuation metric for GTN is its P/B ratio of 1. 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, NFLX has a P/B of 23.43.
These metrics, and several others, help GTN earn a Value grade of A, while NFLX has been given a Value grade of D.
GTN 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 GTN is likely the superior value option right now.