XP or CRCL: Which Is the Better Value Stock Right Now?

Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both XP Inc.A (XP) and Circle Internet Group, Inc. (CRCL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

XP Inc.A has a Zacks Rank of #2 (Buy), while Circle Internet Group, Inc. has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that XP has an improving earnings outlook. 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.

XP currently has a forward P/E ratio of 9.29, while CRCL has a forward P/E of 106.54. We also note that XP has a PEG ratio of 0.61. 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. CRCL currently has a PEG ratio of 4.44.

Another notable valuation metric for XP is its P/B ratio of 2.37. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CRCL has a P/B of 6.57.

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

XP sticks out from CRCL in both our Zacks Rank and Style Scores models, so value investors will likely feel that XP is the better option right now.

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

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