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PSO vs. RSVR: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Media Conglomerates sector have probably already heard of Pearson (PSO) and Reservoir Media, Inc. (RSVR). 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.

Currently, Pearson has a Zacks Rank of #2 (Buy), while Reservoir Media, Inc. has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PSO has an improving earnings outlook. But this is only part of the picture 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 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.

PSO currently has a forward P/E ratio of 18.99, while RSVR has a forward P/E of 63.42. We also note that PSO has a PEG ratio of 1.54. 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. RSVR currently has a PEG ratio of 4.23.

Another notable valuation metric for PSO is its P/B ratio of 1.28. 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, RSVR has a P/B of 1.84.

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

PSO 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 PSO is likely the superior value option right now.

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