Investors interested in Computers - IT Services stocks are likely familiar with Genpact (G) and Epam (EPAM). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Genpact and Epam are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
G currently has a forward P/E ratio of 12.12, while EPAM has a forward P/E of 17.40. We also note that G has a PEG ratio of 1.26. 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. EPAM currently has a PEG ratio of 2.13.
Another notable valuation metric for G is its P/B ratio of 3.25. 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, EPAM has a P/B of 3.26.
These metrics, and several others, help G earn a Value grade of A, while EPAM has been given a Value grade of C.
Both G and EPAM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that G is the superior value option right now.
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Genpact Limited (G): Free Stock Analysis Report EPAM Systems, Inc. (EPAM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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