Investors interested in Internet – Services stocks are likely familiar with Akamai Technologies (AKAM) and The Trade Desk (TTD). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Akamai Technologies has a Zacks Rank of #2 (Buy), while The Trade Desk 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 AKAM 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 tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
AKAM currently has a forward P/E ratio of 19.53, while TTD has a forward P/E of 94.60. We also note that AKAM has a PEG ratio of 1.63. 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. TTD currently has a PEG ratio of 3.94.
Another notable valuation metric for AKAM is its P/B ratio of 4.18. 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, TTD has a P/B of 33.24.
Based on these metrics and many more, AKAM holds a Value grade of B, while TTD has a Value grade of F.
AKAM has seen stronger estimate revision activity and sports more attractive valuation metrics than TTD, so it seems like value investors will conclude that AKAM is the superior option right now.
Zacks’ Top Picks to Cash in on Artificial Intelligence
This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report