Investors interested in Computers - IT Services stocks are likely familiar with Cognizant (CTSH) and Accenture (ACN). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Cognizant is sporting a Zacks Rank of #2 (Buy), while Accenture has a Zacks Rank of #3 (Hold). 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. 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.
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 16.22, while ACN has a forward P/E of 19.59. We also note that CTSH has a PEG ratio of 1.74. 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. ACN currently has a PEG ratio of 2.61.
Another notable valuation metric for CTSH is its P/B ratio of 2.76. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ACN has a P/B of 5.58.
Based on these metrics and many more, CTSH holds a Value grade of B, while ACN has a Value grade of C.
CTSH has seen stronger estimate revision activity and sports more attractive valuation metrics than ACN, so it seems like value investors will conclude that CTSH is the superior option right now.
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Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report Accenture PLC (ACN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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