Investors with an interest in Broadcast Radio and Television stocks have likely encountered both Gray Television (GTN - Free Report) and Netflix (NFLX - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Gray Television is sporting a Zacks Rank of #1 (Strong Buy), while Netflix has a Zacks Rank of #3 (Hold). This means that GTN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
GTN currently has a forward P/E ratio of 24.93, while NFLX has a forward P/E of 90.41. We also note that GTN has a PEG ratio of 2.49. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NFLX currently has a PEG ratio of 3.01.
Another notable valuation metric for GTN is its P/B ratio of 1.40. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NFLX has a P/B of 19.31.
These are just a few of the metrics contributing to GTN's Value grade of B and NFLX's Value grade of F.
GTN 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 GTN is likely the superior value option right now.