Investors interested in Financial - Miscellaneous Services stocks are likely familiar with XP Inc.A (XP) and Brookfield Asset Management (BAM). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, XP Inc.A is sporting a Zacks Rank of #1 (Strong Buy), while Brookfield Asset Management has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that XP likely has seen a stronger improvement to its earnings outlook than BAM has recently. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

XP currently has a forward P/E ratio of 8.46, while BAM has a forward P/E of 28.72. We also note that XP has a PEG ratio of 0.60. 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. BAM currently has a PEG ratio of 1.81.

Another notable valuation metric for XP is its P/B ratio of 2.02. 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, BAM has a P/B of 6.15.

These are just a few of the metrics contributing to XP's Value grade of A and BAM's Value grade of F.

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

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

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