Investors looking for stocks in the Internet - Software sector might want to consider either Sogou (SOGO - Free Report) or Mimecast (MIME - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Sogou and Mimecast are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SOGO has an improving earnings outlook. However, value investors will care about much more than just this.
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.
SOGO currently has a forward P/E ratio of 18.26, while MIME has a forward P/E of 51.36. We also note that SOGO has a PEG ratio of 0.90. 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. MIME currently has a PEG ratio of 2.57.
Another notable valuation metric for SOGO is its P/B ratio of 1.28. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MIME has a P/B of 9.07.
These metrics, and several others, help SOGO earn a Value grade of B, while MIME has been given a Value grade of D.
SOGO sticks out from MIME in both our Zacks Rank and Style Scores models, so value investors will likely feel that SOGO is the better option right now.