IX vs. MCO: Which Stock Is the Better Value Option?

Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either Orix (IX) or Moody's (MCO). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Orix and Moody's are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

IX currently has a forward P/E ratio of 13.70, while MCO has a forward P/E of 27.76. We also note that IX has a PEG ratio of 0.86. 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. MCO currently has a PEG ratio of 2.40.

Another notable valuation metric for IX is its P/B ratio of 1.34. 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, MCO has a P/B of 19.66.

These metrics, and several others, help IX earn a Value grade of A, while MCO has been given a Value grade of F.

Both IX and MCO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that IX is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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