Investors interested in stocks from the Computers - IT Services sector have probably already heard of Leidos (LDOS) and ExlService Holdings (EXLS). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Leidos has a Zacks Rank of #2 (Buy), while ExlService Holdings has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that LDOS likely has seen a stronger improvement to its earnings outlook than EXLS has recently. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
LDOS currently has a forward P/E ratio of 16.08, while EXLS has a forward P/E of 20.90. We also note that LDOS has a PEG ratio of 1.38. 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. EXLS currently has a PEG ratio of 1.50.
Another notable valuation metric for LDOS is its P/B ratio of 4.86. 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, EXLS has a P/B of 6.67.
These are just a few of the metrics contributing to LDOS's Value grade of B and EXLS's Value grade of C.
LDOS stands above EXLS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LDOS is the superior value option right now.
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Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report ExlService Holdings, Inc. (EXLS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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