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

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Investors with an interest in Outsourcing stocks have likely encountered both 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Sykes Enterprises is sporting a Zacks Rank of #1 (Strong Buy), while Automatic Data Processing has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SYKE has an improving earnings outlook. But this is just one factor that value investors are interested in.

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 13.40, while ADP has a forward P/E of 27.16. We also note that SYKE has a PEG ratio of 1.68. 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 2.26.

Another notable valuation metric for SYKE is its P/B ratio of 1.47. 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 10.15.

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

SYKE has seen stronger estimate revision activity and sports more attractive valuation metrics than ADP, so it seems like value investors will conclude that SYKE is the superior option right now.


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