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SYF vs. RPRX: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Financial - Miscellaneous Services sector have probably already heard of Synchrony (SYF - Free Report) and Royalty Pharma (RPRX - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Synchrony and Royalty Pharma are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SYF has an improving earnings outlook. But this is only part of the picture for value investors.

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.

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.

SYF currently has a forward P/E ratio of 8.15, while RPRX has a forward P/E of 16.27. We also note that SYF has a PEG ratio of 0.91. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RPRX currently has a PEG ratio of 1.53.

Another notable valuation metric for SYF is its P/B ratio of 1.93. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, RPRX has a P/B of 2.66.

These are just a few of the metrics contributing to SYF's Value grade of A and RPRX's Value grade of C.

SYF sticks out from RPRX in both our Zacks Rank and Style Scores models, so value investors will likely feel that SYF is the better option right now.


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