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PYPL or PANW: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Internet - Software sector might want to consider either Paypal (PYPL - Free Report) or Palo Alto Networks (PANW - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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.

Paypal has a Zacks Rank of #2 (Buy), while Palo Alto Networks has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PYPL is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

PYPL currently has a forward P/E ratio of 17.97, while PANW has a forward P/E of 54.69. We also note that PYPL has a PEG ratio of 1.45. 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. PANW currently has a PEG ratio of 2.83.

Another notable valuation metric for PYPL is its P/B ratio of 3.93. 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, PANW has a P/B of 21.56.

These metrics, and several others, help PYPL earn a Value grade of B, while PANW has been given a Value grade of F.

PYPL 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 PYPL is likely the superior value option right now.


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Palo Alto Networks, Inc. (PANW) - free report >>

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