Investors interested in stocks from the Computers - IT Services sector have probably already heard of Genpact (G) and ServiceNow (NOW). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, Genpact is sporting a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold). This means that G's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
G currently has a forward P/E ratio of 13.00, while NOW has a forward P/E of 58.70. We also note that G has a PEG ratio of 1.52. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NOW currently has a PEG ratio of 2.46.
Another notable valuation metric for G is its P/B ratio of 3.25. 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, NOW has a P/B of 18.76.
These are just a few of the metrics contributing to G's Value grade of B and NOW's Value grade of F.
G stands above NOW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that G is the superior value option right now.
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Genpact Limited (G): Free Stock Analysis Report ServiceNow, Inc. (NOW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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