Investors with an interest in Financial - Investment Bank stocks have likely encountered both LPL Financial (LPLA - Free Report) and Moelis (MC - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
LPL Financial and Moelis are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LPLA has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
LPLA currently has a forward P/E ratio of 13.21, while MC has a forward P/E of 20.91. We also note that LPLA has a PEG ratio of 0.88. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MC currently has a PEG ratio of 2.04.
Another notable valuation metric for LPLA is its P/B ratio of 5.73. 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, MC has a P/B of 11.02.
These metrics, and several others, help LPLA earn a Value grade of B, while MC has been given a Value grade of D.
LPLA sticks out from MC in both our Zacks Rank and Style Scores models, so value investors will likely feel that LPLA is the better option right now.