Investors interested in Internet - Software and Services stocks are likely familiar with Criteo S.A. (CRTO - Free Report) and RingCentral (RNG - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Criteo S.A. is sporting a Zacks Rank of #1 (Strong Buy), while RingCentral has a Zacks Rank of #3 (Hold). This means that CRTO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
CRTO currently has a forward P/E ratio of 7.66, while RNG has a forward P/E of 160.57. We also note that CRTO has a PEG ratio of 1.53. 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 8.10.
Another notable valuation metric for CRTO is its P/B ratio of 1.23. 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, RNG has a P/B of 28.91.
These are just a few of the metrics contributing to CRTO's Value grade of A and RNG's Value grade of F.
CRTO 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 CRTO is likely the superior value option right now.