Investors with an interest in Gaming stocks have likely encountered both Melco Resorts (MLCO - Free Report) and PlayAGS (AGS - 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 Melco Resorts and PlayAGS have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
MLCO currently has a forward P/E ratio of 23.55, while AGS has a forward P/E of 31.72. We also note that MLCO has a PEG ratio of 1.07. 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. AGS currently has a PEG ratio of 2.64.
Another notable valuation metric for MLCO is its P/B ratio of 4.14. 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, AGS has a P/B of 4.84.
These metrics, and several others, help MLCO earn a Value grade of B, while AGS has been given a Value grade of D.
Both MLCO and AGS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MLCO is the superior value option right now.