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CVET vs. ARCE: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Internet - Software sector might want to consider either Covetrus (CVET) or Arco Platform Limited (ARCE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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, Covetrus is sporting a Zacks Rank of #2 (Buy), while Arco Platform Limited has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CVET is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

CVET currently has a forward P/E ratio of 21.40, while ARCE has a forward P/E of 370.88. We also note that CVET has a PEG ratio of 0.86. 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. ARCE currently has a PEG ratio of 7.66.

Another notable valuation metric for CVET is its P/B ratio of 1.15. 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, ARCE has a P/B of 4.24.

These are just a few of the metrics contributing to CVET's Value grade of A and ARCE's Value grade of D.

CVET stands above ARCE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CVET is the superior value option right now.


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Covetrus, Inc. (CVET) : Free Stock Analysis Report
 
Arco Platform Limited (ARCE) : Free Stock Analysis Report
 
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Zacks Investment Research