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SABR or RNG: Which Is the Better Value Stock Right Now?

Zacks

Investors interested in stocks from the Internet – Software and Services sector have probably already heard of Sabre (SABR) and RingCentral (RNG). But which of these two stocks presents investors with the better value opportunity right now? 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 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.

Both Sabre and RingCentral have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.

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.


The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SABR currently has a forward P/E ratio of 17.74, while RNG has a forward P/E of 126.34. We also note that SABR has a PEG ratio of 2.47. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RNG currently has a PEG ratio of 4.34.

Another notable valuation metric for SABR is its P/B ratio of 8.47. 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, RNG has a P/B of 22.46.

These are just a few of the metrics contributing to SABR's Value grade of B and RNG's Value grade of F.

Both SABR and RNG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SABR is the superior value option right now.


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