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Investors interested in Technology Services stocks are likely familiar with Coherent (COHR) and MeridianLink (MLNK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Coherent is sporting a Zacks Rank of #2 (Buy), while MeridianLink 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 COHR has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
COHR currently has a forward P/E ratio of 19.10, while MLNK has a forward P/E of 58.78. We also note that COHR has a PEG ratio of 0.41. 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. MLNK currently has a PEG ratio of 1.98.
Another notable valuation metric for COHR is its P/B ratio of 1.86. 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, MLNK has a P/B of 3.57.
These metrics, and several others, help COHR earn a Value grade of B, while MLNK has been given a Value grade of C.
COHR has seen stronger estimate revision activity and sports more attractive valuation metrics than MLNK, so it seems like value investors will conclude that COHR is the superior option right now.
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Coherent Corp. (COHR) : Free Stock Analysis Report
MeridianLink, Inc. (MLNK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).