MGNI or ZM: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Internet - Software sector have probably already heard of Magnite (MGNI) and Zoom Communications (ZM). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Magnite is sporting a Zacks Rank of #2 (Buy), while Zoom Communications has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MGNI 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.

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.

MGNI currently has a forward P/E ratio of 11.70, while ZM has a forward P/E of 12.95. We also note that MGNI has a PEG ratio of 0.43. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZM currently has a PEG ratio of 2.92.

Another notable valuation metric for MGNI is its P/B ratio of 1.92. 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, ZM has a P/B of 2.29.

These are just a few of the metrics contributing to MGNI's Value grade of B and ZM's Value grade of C.

MGNI has seen stronger estimate revision activity and sports more attractive valuation metrics than ZM, so it seems like value investors will conclude that MGNI is the superior option right now.

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

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