Investors interested in stocks from the Computers - IT Services sector have probably already heard of 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Genpact and Epam have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have 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.
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 11.71, while EPAM has a forward P/E of 17.39. We also note that G has a PEG ratio of 1.22. 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. EPAM currently has a PEG ratio of 2.13.
Another notable valuation metric for G is its P/B ratio of 3.14. 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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