Investors with an interest in Internet - Software and Services stocks have likely encountered both Sabre (SABR - Free Report) and RingCentral (RNG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.
Both Sabre and RingCentral have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SABR currently has a forward P/E ratio of 23.42, while RNG has a forward P/E of 166.72. We also note that SABR has a PEG ratio of 5.15. 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 8.41.
Another notable valuation metric for SABR is its P/B ratio of 6.52. 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 30.02.
Based on these metrics and many more, SABR holds a Value grade of B, while RNG has a Value grade of F.
Both SABR and RNG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SABR is the superior value option right now.