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BIDU vs. GOOG: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Internet - Services stocks have likely encountered both Baidu Inc. (BIDU - Free Report) and Alphabet Inc. (GOOG - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Baidu Inc. is sporting a Zacks Rank of #2 (Buy), while Alphabet Inc. has a Zacks Rank of #3 (Hold). This means that BIDU'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.

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.

BIDU currently has a forward P/E ratio of 13.28, while GOOG has a forward P/E of 22.48. We also note that BIDU has a PEG ratio of 0.28. 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. GOOG currently has a PEG ratio of 1.55.

Another notable valuation metric for BIDU is its P/B ratio of 1.41. 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, GOOG has a P/B of 5.89.

Based on these metrics and many more, BIDU holds a Value grade of A, while GOOG has a Value grade of C.

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


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