Investors interested in stocks from the Internet – Commerce sector have probably already heard of Stamps.com (NASDAQ: STMP) and Amazon (NASDAQ:AMZN). Which name gives investors 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Stamps.com stock has a Zacks Rank of #1 (Strong Buy), while Amazon stock has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STMP is likely seeing its earnings outlook improve to a greater extent. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored price-earnings ratio, price-sales ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company’s fair value.
STMP stock currently has a forward P/E ratio of 17.24, while AMZN stock has a forward P/E of 74.71. We also note that STMP has a price/earnings to growth ratio of 1.15. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company’s expected earnings per share growth rate. AMZN currently has a PEG ratio of 2.28.
Another notable valuation metric for STMP stock is its price-book ratio of 2.02. 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, AMZN stock has a P/B ratio of 16.73.
These metrics, and several others, help STMP stock earn a Value grade of B, while AMZN stock has been given a Value grade of D.
STMP 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 STMP stock is likely a superior value option to AMZN stock right now.
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Stamps.com Inc. (STMP): Free Stock Analysis Report
