Investors interested in stocks from the Computers - IT Services sector have probably already heard of Cognizant (CTSH) and Epam (EPAM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Cognizant and Epam are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, 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. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CTSH currently has a forward P/E ratio of 15.96, while EPAM has a forward P/E of 16.84. We also note that CTSH has a PEG ratio of 1.85. 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 1.89.
Another notable valuation metric for CTSH is its P/B ratio of 2.68. 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, EPAM has a P/B of 2.83.
These are just a few of the metrics contributing to CTSH's Value grade of B and EPAM's Value grade of C.
CTSH sticks out from EPAM in both our Zacks Rank and Style Scores models, so value investors will likely feel that CTSH is the better option right now.
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Cognizant Technology Solutions Corporation (CTSH): 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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