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BBSI or PAYX: Which Is the Better Value Stock Right Now?

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Investors interested in Outsourcing stocks are likely familiar with Barrett Business Services (BBSI - Free Report) and Paychex (PAYX - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Barrett Business Services is sporting a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BBSI has an improving earnings outlook. But this is only part of the picture 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.

BBSI currently has a forward P/E ratio of 12.36, while PAYX has a forward P/E of 27.76. We also note that BBSI has a PEG ratio of 0.88. 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. PAYX currently has a PEG ratio of 3.70.

Another notable valuation metric for BBSI is its P/B ratio of 3.16. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PAYX has a P/B of 13.46.

These metrics, and several others, help BBSI earn a Value grade of A, while PAYX has been given a Value grade of D.

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


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