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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with 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. But this is just one factor that value investors are interested in.
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.
G currently has a forward P/E ratio of 11.62, while NOW has a forward P/E of 57.17. We also note that G has a PEG ratio of 1.26. 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. NOW currently has a PEG ratio of 2.40.
Another notable valuation metric for G is its P/B ratio of 2.78. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NOW has a P/B of 18.29.
These metrics, and several others, help G earn a Value grade of A, while NOW has been given a 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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