Investors with an interest in Computers - IT Services stocks have likely encountered both Cognizant (CTSH) 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Cognizant has a Zacks Rank of #2 (Buy), while CoStar Group has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CTSH has an improving earnings outlook. But this is only part of the picture for value investors.
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.
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.
CTSH currently has a forward P/E ratio of 13.65, while CSGP has a forward P/E of 79.77. We also note that CTSH has a PEG ratio of 1.47. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CSGP currently has a PEG ratio of 1.91.
Another notable valuation metric for CTSH is its P/B ratio of 2.32. 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 3.28.
Based on these metrics and many more, CTSH holds a Value grade of A, while CSGP has a Value grade of F.
CTSH stands above CSGP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CTSH is the superior value option right now.
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Cognizant Technology Solutions Corporation (CTSH): 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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