Investors with an interest in Computer - Software stocks have likely encountered both Konami Corp. (KNMCY - Free Report) and Pegasystems (PEGA - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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, Konami Corp. is sporting a Zacks Rank of #2 (Buy), while Pegasystems has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KNMCY is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
KNMCY currently has a forward P/E ratio of 15.06, while PEGA has a forward P/E of 85.32. We also note that KNMCY has a PEG ratio of 0.60. 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. PEGA currently has a PEG ratio of 10.66.
Another notable valuation metric for KNMCY is its P/B ratio of 2.14. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, PEGA has a P/B of 7.73.
These are just a few of the metrics contributing to KNMCY's Value grade of B and PEGA's Value grade of F.
KNMCY has seen stronger estimate revision activity and sports more attractive valuation metrics than PEGA, so it seems like value investors will conclude that KNMCY is the superior option right now.