PRGS or MSFT: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Computer - Software sector might want to consider either Progress Software (PRGS) or Microsoft (MSFT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Progress Software and Microsoft are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PRGS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

PRGS currently has a forward P/E ratio of 7.02, while MSFT has a forward P/E of 24.56. We also note that PRGS has a PEG ratio of 1.40. 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. MSFT currently has a PEG ratio of 1.55.

Another notable valuation metric for PRGS is its P/B ratio of 3.5. 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, MSFT has a P/B of 8.08.

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

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

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

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