Investors interested in stocks from the Audio Video Production sector have probably already heard of Sony (SNE - Free Report) and Dolby Laboratories (DLB - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Sony has a Zacks Rank of #2 (Buy), while Dolby Laboratories has a Zacks Rank of #3 (Hold) right now. This means that SNE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
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.
SNE currently has a forward P/E ratio of 13.89, while DLB has a forward P/E of 22.19. We also note that SNE has a PEG ratio of 1.47. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DLB currently has a PEG ratio of 1.85.
Another notable valuation metric for SNE is its P/B ratio of 2.03. 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, DLB has a P/B of 3.25.
Based on these metrics and many more, SNE holds a Value grade of B, while DLB has a Value grade of D.
SNE is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SNE is likely the superior value option right now.