Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both PRA Group (PRAA - Free Report) and Moody's (MCO - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
PRA Group and Moody's are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
PRAA currently has a forward P/E ratio of 20.22, while MCO has a forward P/E of 26.67. We also note that PRAA has a PEG ratio of 0.55. 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. MCO currently has a PEG ratio of 2.67.
Another notable valuation metric for PRAA is its P/B ratio of 1.44. 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, MCO has a P/B of 59.04.
Based on these metrics and many more, PRAA holds a Value grade of B, while MCO has a Value grade of F.
Both PRAA and MCO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PRAA is the superior value option right now.