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

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Investors with an interest in Outsourcing stocks have likely encountered both Barrett Business Services (BBSI - 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Barrett Business Services has a Zacks Rank of #1 (Strong Buy), while Paychex has a Zacks Rank of #3 (Hold) right now. This means that BBSI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

BBSI currently has a forward P/E ratio of 14.41, while PAYX has a forward P/E of 27.35. We also note that BBSI has a PEG ratio of 1.03. 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 3.65.

Another notable valuation metric for BBSI is its P/B ratio of 3.83. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, PAYX has a P/B of 13.05.

These are just a few of the metrics contributing to BBSI's Value grade of B and PAYX's Value grade of C.

BBSI sticks out from PAYX in both our Zacks Rank and Style Scores models, so value investors will likely feel that BBSI is the better option right now.

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Paychex, Inc. (PAYX) - free report >>

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