Investors looking for stocks in the Internet - Software sector might want to consider either Meet Group (MEET - Free Report) or Arco Platform Limited (ARCE - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Meet Group and Arco Platform Limited are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that MEET likely has seen a stronger improvement to its earnings outlook than ARCE has recently. But this is only part of the picture for value investors.
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 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.
MEET currently has a forward P/E ratio of 9.29, while ARCE has a forward P/E of 298.79. We also note that MEET has a PEG ratio of 0.39. 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. ARCE currently has a PEG ratio of 6.17.
Another notable valuation metric for MEET is its P/B ratio of 1.57. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ARCE has a P/B of 3.31.
These metrics, and several others, help MEET earn a Value grade of A, while ARCE has been given a Value grade of F.
MEET sticks out from ARCE in both our Zacks Rank and Style Scores models, so value investors will likely feel that MEET is the better option right now.