Investors looking for stocks in the Technology Services sector might want to consider either Rocket Companies (RKT) or ShotSpotter (SSTI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Rocket Companies has a Zacks Rank of #2 (Buy), while ShotSpotter has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that RKT likely has seen a stronger improvement to its earnings outlook than SSTI has recently. 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.
RKT currently has a forward P/E ratio of 12.01, while SSTI has a forward P/E of 223.89. We also note that RKT has a PEG ratio of 1.20. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SSTI currently has a PEG ratio of 11.19.
Another notable valuation metric for RKT is its P/B ratio of 6.82. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SSTI has a P/B of 15.60.
These are just a few of the metrics contributing to RKT's Value grade of B and SSTI's Value grade of D.
RKT stands above SSTI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RKT is the superior value option right now.
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