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G vs. PAYX: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Outsourcing sector have probably already heard of Genpact (G - Free Report) and Paychex (PAYX - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Genpact and Paychex are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that G's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

G currently has a forward P/E ratio of 17.91, while PAYX has a forward P/E of 30.27. We also note that G has a PEG ratio of 1.82. 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 3.78.

Another notable valuation metric for G is its P/B ratio of 4.31. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, PAYX has a P/B of 11.08.

Based on these metrics and many more, G holds a Value grade of B, while PAYX has a Value grade of D.

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


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