Investors interested in stocks from the Computers - IT Services sector have probably already heard of Amdocs (DOX) and CoStar Group (CSGP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Amdocs and CoStar Group are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
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.
DOX currently has a forward P/E ratio of 11.03, while CSGP has a forward P/E of 91.89. We also note that DOX has a PEG ratio of 1.25. 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. CSGP currently has a PEG ratio of 2.18.
Another notable valuation metric for DOX is its P/B ratio of 2.67. 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, CSGP has a P/B of 3.8.
These are just a few of the metrics contributing to DOX's Value grade of A and CSGP's Value grade of F.
Both DOX and CSGP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DOX is the superior value option right now.
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Amdocs Limited (DOX): Free Stock Analysis Report CoStar Group, Inc. (CSGP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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