Investors with an interest in Financial Transaction Services stocks have likely encountered both PagSeguro Digital Ltd. (PAGS) and DLocal (DLO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, both PagSeguro Digital Ltd. and DLocal are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture 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.

PAGS currently has a forward P/E ratio of 6.43, while DLO has a forward P/E of 23.86. We also note that PAGS has a PEG ratio of 0.47. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DLO currently has a PEG ratio of 3.26.

Another notable valuation metric for PAGS is its P/B ratio of 0.96. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DLO has a P/B of 9.07.

Based on these metrics and many more, PAGS holds a Value grade of A, while DLO has a Value grade of C.

Both PAGS and DLO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PAGS is the superior value option right now.

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PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report

DLocal Limited (DLO) : Free Stock Analysis Report

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

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