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MOMO or RNG: Which Is the Better Value Stock Right Now?

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Investors interested in Internet - Software and Services stocks are likely familiar with Momo Inc. (MOMO - Free Report) and RingCentral (RNG - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Momo Inc. and RingCentral are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that MOMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

MOMO currently has a forward P/E ratio of 9.55, while RNG has a forward P/E of 158.27. We also note that MOMO has a PEG ratio of 0.40. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RNG currently has a PEG ratio of 7.38.

Another notable valuation metric for MOMO is its P/B ratio of 3.46. 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, RNG has a P/B of 28.39.

These metrics, and several others, help MOMO earn a Value grade of A, while RNG has been given a Value grade of F.

MOMO has seen stronger estimate revision activity and sports more attractive valuation metrics than RNG, so it seems like value investors will conclude that MOMO is the superior option right now.


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