Investors looking for stocks in the Internet - Content sector might want to consider either China Distance (DL - Free Report) or Yelp (YELP - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Currently, China Distance has a Zacks Rank of #1 (Strong Buy), while Yelp has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DL has an improving earnings outlook. But this is just one piece of the puzzle 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.
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.
DL currently has a forward P/E ratio of 9.88, while YELP has a forward P/E of 35.09. We also note that DL has a PEG ratio of 0.66. 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. YELP currently has a PEG ratio of 1.67.
Another notable valuation metric for DL is its P/B ratio of 2.37. 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, YELP has a P/B of 3.16.
These are just a few of the metrics contributing to DL's Value grade of A and YELP's Value grade of C.
DL has seen stronger estimate revision activity and sports more attractive valuation metrics than YELP, so it seems like value investors will conclude that DL is the superior option right now.