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FFIV vs. ZEN: Which Stock Should Value Investors Buy Now?

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Investors interested in Internet - Software stocks are likely familiar with F5 Networks (FFIV - Free Report) and Zendesk . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, F5 Networks is sporting a Zacks Rank of #2 (Buy), while Zendesk 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 FFIV has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

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.

FFIV currently has a forward P/E ratio of 18.46, while ZEN has a forward P/E of 644.21. We also note that FFIV has a PEG ratio of 2.02. 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. ZEN currently has a PEG ratio of 23.

Another notable valuation metric for FFIV is its P/B ratio of 8.81. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ZEN has a P/B of 15.56.

Based on these metrics and many more, FFIV holds a Value grade of B, while ZEN has a Value grade of F.

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


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