Investors looking for stocks in the Computers - IT Services sector might want to consider either Cognizant (CTSH) or Wipro Limited (WIT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Cognizant and Wipro Limited are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that CTSH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
CTSH currently has a forward P/E ratio of 13.94, while WIT has a forward P/E of 18.79. We also note that CTSH has a PEG ratio of 1.44. 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. WIT currently has a PEG ratio of 15.92.
Another notable valuation metric for CTSH is its P/B ratio of 2.39. 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, WIT has a P/B of 2.83.
Based on these metrics and many more, CTSH holds a Value grade of A, while WIT has a Value grade of C.
CTSH is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CTSH is likely the superior value option right now.
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Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report Wipro Limited (WIT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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