In This Article:
Investors looking for stocks in the Computers - IT Services sector might want to consider either Genpact (G) or ServiceNow (NOW). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Genpact has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that G likely has seen a stronger improvement to its earnings outlook than NOW has recently. But this is just one piece of the puzzle for value investors.
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.
G currently has a forward P/E ratio of 12.78, while NOW has a forward P/E of 44.84. We also note that G has a PEG ratio of 1.38. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NOW currently has a PEG ratio of 1.86.
Another notable valuation metric for G is its P/B ratio of 3.33. 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, NOW has a P/B of 15.60.
These are just a few of the metrics contributing to G's Value grade of B and NOW's Value grade of F.
G has seen stronger estimate revision activity and sports more attractive valuation metrics than NOW, so it seems like value investors will conclude that G is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Genpact Limited (G) : Free Stock Analysis Report
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).