Investors with an interest in Internet - Software and Services stocks have likely encountered both Sabre (SABR - Free Report) and RingCentral (RNG - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.
Both Sabre and RingCentral have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
SABR currently has a forward P/E ratio of 17.70, while RNG has a forward P/E of 118.01. We also note that SABR has a PEG ratio of 2.43. 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. RNG currently has a PEG ratio of 4.05.
Another notable valuation metric for SABR is its P/B ratio of 8.46. 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, RNG has a P/B of 21.05.
Based on these metrics and many more, SABR holds a Value grade of B, while RNG has a Value grade of F.
Both SABR and RNG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SABR is the superior value option right now.