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KN vs. OOMA: Which Stock Is the Better Value Option?

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Investors with an interest in Communication - Components stocks have likely encountered both Knowles (KN - Free Report) and Ooma (OOMA - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Knowles and Ooma are sporting Zacks Ranks of #2 (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 KN has an improving earnings 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.

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.

KN currently has a forward P/E ratio of 13, while OOMA has a forward P/E of 40.19. We also note that KN has a PEG ratio of 1.30. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. OOMA currently has a PEG ratio of 20.09.

Another notable valuation metric for KN is its P/B ratio of 1.37. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, OOMA has a P/B of 7.19.

These are just a few of the metrics contributing to KN's Value grade of B and OOMA's Value grade of C.

KN has seen stronger estimate revision activity and sports more attractive valuation metrics than OOMA, so it seems like value investors will conclude that KN is the superior option right now.


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