Investors interested in stocks from the Financial Transaction Services sector have probably already heard of Cardtronics (CATM - Free Report) and Envestnet (ENV - 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.
Cardtronics and Envestnet are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that CATM likely has seen a stronger improvement to its earnings outlook than ENV has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CATM currently has a forward P/E ratio of 17.22, while ENV has a forward P/E of 33.94. We also note that CATM has a PEG ratio of 1.43. 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. ENV currently has a PEG ratio of 2.38.
Another notable valuation metric for CATM is its P/B ratio of 3.49. 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, ENV has a P/B of 6.05.
Based on these metrics and many more, CATM holds a Value grade of A, while ENV has a Value grade of F.
CATM sticks out from ENV in both our Zacks Rank and Style Scores models, so value investors will likely feel that CATM is the better option right now.