Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both Lufax Holding Ltd. Sponsored ADR (LU) and Blackstone Inc. (BX). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Lufax Holding Ltd. Sponsored ADR and Blackstone Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that LU likely has seen a stronger improvement to its earnings outlook than BX has recently. But this is just one factor that value investors are interested in.
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 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.
LU currently has a forward P/E ratio of 4.85, while BX has a forward P/E of 20.72. We also note that LU has a PEG ratio of 0.31. 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. BX currently has a PEG ratio of 1.25.
Another notable valuation metric for LU is its P/B ratio of 1. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, BX has a P/B of 3.73.
These metrics, and several others, help LU earn a Value grade of B, while BX has been given a Value grade of C.
LU has seen stronger estimate revision activity and sports more attractive valuation metrics than BX, so it seems like value investors will conclude that LU is the superior option right now.
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