Investors interested in Computers - IT Services stocks are likely familiar with Genpact (G) and ServiceNow (NOW). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Genpact and ServiceNow are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
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 11.22, while NOW has a forward P/E of 55.84. We also note that G has a PEG ratio of 1.22. 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. NOW currently has a PEG ratio of 2.34.
Another notable valuation metric for G is its P/B ratio of 2.69. 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 17.87.
Based on these metrics and many more, G holds a Value grade of A, while NOW has a Value grade of F.
Both G and NOW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we 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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