Investors interested in Internet - Software stocks are likely familiar with Sogou (SOGO - Free Report) and Mimecast (MIME - 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.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Sogou has a Zacks Rank of #2 (Buy), while Mimecast has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SOGO likely has seen a stronger improvement to its earnings outlook than MIME has recently. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 17.95, while MIME has a forward P/E of 64.22. We also note that SOGO has a PEG ratio of 0.89. 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 3.21.
Another notable valuation metric for SOGO is its P/B ratio of 1.25. 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, MIME has a P/B of 11.01.
These are just a few of the metrics contributing to SOGO's Value grade of A and MIME's Value grade of D.
SOGO has seen stronger estimate revision activity and sports more attractive valuation metrics than MIME, so it seems like value investors will conclude that SOGO is the superior option right now.