Investors looking for stocks in the Outsourcing sector might want to consider either Barrett Business Services (BBSI - Free Report) or Paychex (PAYX - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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.
Barrett Business Services and Paychex are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BBSI likely has seen a stronger improvement to its earnings outlook than PAYX has recently. But this is just one piece of the puzzle for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BBSI currently has a forward P/E ratio of 14.06, while PAYX has a forward P/E of 27.41. We also note that BBSI has a PEG ratio of 1.17. 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. PAYX currently has a PEG ratio of 3.43.
Another notable valuation metric for BBSI is its P/B ratio of 2.21. 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, PAYX has a P/B of 9.71.
Based on these metrics and many more, BBSI holds a Value grade of A, while PAYX has a Value grade of D.
BBSI stands above PAYX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBSI is the superior value option right now.