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 companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Sony is sporting a Zacks Rank of #2 (Buy), while Dolby Laboratories has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SNE has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
SNE currently has a forward P/E ratio of 11.39, while DLB has a forward P/E of 22.79. We also note that SNE has a PEG ratio of 1.13. 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 1.90.
Another notable valuation metric for SNE is its P/B ratio of 1.81. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DLB has a P/B of 3.31.
These are just a few of the metrics contributing to SNE's Value grade of A and DLB's 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.