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.
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 has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that G is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
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 12.41, while NOW has a forward P/E of 50.09. We also note that G has a PEG ratio of 1.30. 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 2.09.
Another notable valuation metric for G is its P/B ratio of 3.03. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 15.94.
These metrics, and several others, help G earn a Value grade of A, while NOW has been given a Value grade of F.
G 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 G is likely 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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