Investors with an interest in Internet - Commerce stocks have likely encountered both Expedia (EXPE - Free Report) and Amazon (AMZN - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Expedia and Amazon are sporting Zacks Ranks of #2 (Buy) and #2 (Buy) respectively, right now. This means that EXPE'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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
EXPE currently has a forward P/E ratio of 29.52, while AMZN has a forward P/E of 128.06. We also note that EXPE has a PEG ratio of 2.03. 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. AMZN currently has a PEG ratio of 4.24.
Another notable valuation metric for EXPE is its P/B ratio of 3.12. 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, AMZN has a P/B of 25.32.
Based on these metrics and many more, EXPE holds a Value grade of B, while AMZN has a Value grade of F.
EXPE stands above AMZN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EXPE is the superior value option right now.