Investors interested in stocks from the Financial Transaction Services sector have probably already heard of Cardtronics (CATM - Free Report) and Fiserv (FISV - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, Cardtronics has a Zacks Rank of #1 (Strong Buy), while Fiserv has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CATM 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.
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.
CATM currently has a forward P/E ratio of 14.14, while FISV has a forward P/E of 22.16. We also note that CATM has a PEG ratio of 1.18. 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. FISV currently has a PEG ratio of 1.85.
Another notable valuation metric for CATM is its P/B ratio of 3.26. 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, FISV has a P/B of 11.71.
These are just a few of the metrics contributing to CATM's Value grade of A and FISV's Value grade of D.
CATM stands above FISV thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CATM is the superior value option right now.