Investors looking for stocks in the Internet - Software sector might want to consider either j2 Global (JCOM - Free Report) or Workday (WDAY - 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, j2 Global is sporting a Zacks Rank of #2 (Buy), while Workday has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that JCOM likely has seen a stronger improvement to its earnings outlook than WDAY has recently. But this is just one piece of the puzzle for value investors.
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.
JCOM currently has a forward P/E ratio of 13.19, while WDAY has a forward P/E of 108.57. We also note that JCOM has a PEG ratio of 1.65. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WDAY currently has a PEG ratio of 3.61.
Another notable valuation metric for JCOM is its P/B ratio of 3.92. 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, WDAY has a P/B of 17.58.
Based on these metrics and many more, JCOM holds a Value grade of B, while WDAY has a Value grade of F.
JCOM has seen stronger estimate revision activity and sports more attractive valuation metrics than WDAY, so it seems like value investors will conclude that JCOM is the superior option right now.