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SYKE or ADP: Which Is the Better Value Stock Right Now?

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Investors interested in Outsourcing stocks are likely familiar with Sykes Enterprises and Automatic Data Processing (ADP - Free Report) . 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, both Sykes Enterprises and Automatic Data Processing are holding a Zacks Rank of # 2 (Buy). 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. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

SYKE currently has a forward P/E ratio of 14.32, while ADP has a forward P/E of 28.02. We also note that SYKE has a PEG ratio of 1.43. 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. ADP currently has a PEG ratio of 2.33.

Another notable valuation metric for SYKE is its P/B ratio of 1.95. 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, ADP has a P/B of 12.05.

Based on these metrics and many more, SYKE holds a Value grade of A, while ADP has a Value grade of D.

Both SYKE and ADP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SYKE is the superior value option right now.


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