Investors with an interest in Internet - Software stocks have likely encountered both Paycom Software (PAYC) and Autodesk $ADSK (ADSK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Paycom Software and Autodesk are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PAYC has an improving earnings outlook. However, value investors will care about much more than just this.
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 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.
PAYC currently has a forward P/E ratio of 13.09, while ADSK has a forward P/E of 19.12. We also note that PAYC has a PEG ratio of 1.04. 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. ADSK currently has a PEG ratio of 1.15.
Another notable valuation metric for PAYC is its P/B ratio of 7.99. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ADSK has a P/B of 16.4.
These are just a few of the metrics contributing to PAYC's Value grade of B and ADSK's Value grade of C.
PAYC 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 PAYC is likely the superior value option right now.
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Paycom Software, Inc. (PAYC): Free Stock Analysis Report
Autodesk, Inc. (ADSK): Free Stock Analysis Report