Investors with an interest in Media Conglomerates stocks have likely encountered both Pearson (PSO) and Walt Disney (DIS). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Pearson and Walt Disney are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PSO is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
PSO currently has a forward P/E ratio of 18.09, while DIS has a forward P/E of 29.15. We also note that PSO has a PEG ratio of 1.03. 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. DIS currently has a PEG ratio of 1.46.
Another notable valuation metric for PSO is its P/B ratio of 1.36. 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, DIS has a P/B of 2.12.
These metrics, and several others, help PSO earn a Value grade of A, while DIS has been given a Value grade of C.
PSO sticks out from DIS in both our Zacks Rank and Style Scores models, so value investors will likely feel that PSO is the better option right now.
Comments