Investors interested in Internet - Software stocks are likely familiar with StoneCo Ltd. (STNE) and Paycor HCM, Inc. (PYCR). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.

StoneCo Ltd. has a Zacks Rank of #1 (Strong Buy), while Paycor HCM, Inc. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that STNE likely has seen a stronger improvement to its earnings outlook than PYCR has recently. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

STNE currently has a forward P/E ratio of 8.69, while PYCR has a forward P/E of 39.56. We also note that STNE has a PEG ratio of 0.33. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PYCR currently has a PEG ratio of 2.05.

Another notable valuation metric for STNE is its P/B ratio of 1.55. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PYCR has a P/B of 3.12.

These metrics, and several others, help STNE earn a Value grade of B, while PYCR has been given a Value grade of F.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

StoneCo Ltd. (STNE) : Free Stock Analysis Report

Paycor HCM, Inc. (PYCR) : Free Stock Analysis Report

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

Zacks Investment Research