APPS vs. FFIV: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Internet - Software sector have probably already heard of Digital Turbine (APPS) and F5 Networks (FFIV). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, both Digital Turbine and F5 Networks are sporting a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

APPS currently has a forward P/E ratio of 8.00, while FFIV has a forward P/E of 18.21. We also note that APPS has a PEG ratio of 0.19. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FFIV currently has a PEG ratio of 6.26.

Another notable valuation metric for APPS is its P/B ratio of 1.66. 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, FFIV has a P/B of 4.62.

These metrics, and several others, help APPS earn a Value grade of B, while FFIV has been given a Value grade of D.

Both APPS and FFIV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that APPS 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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