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

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Investors with an interest in Outsourcing stocks have likely encountered both Genpact (G - Free Report) and Automatic Data Processing (ADP - 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 Automatic Data Processing are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

G currently has a forward P/E ratio of 16.78, while ADP has a forward P/E of 27.96. We also note that G has a PEG ratio of 1.71. 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 G is its P/B ratio of 4.11. 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, ADP has a P/B of 12.

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

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


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Automatic Data Processing, Inc. (ADP) - free report >>

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