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

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Investors interested in stocks from the Outsourcing sector have probably already heard of Cap Gemini SA (CGEMY - 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.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Cap Gemini SA and Paychex are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

CGEMY currently has a forward P/E ratio of 16.29, while PAYX has a forward P/E of 28.16. We also note that CGEMY has a PEG ratio of 1.35. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PAYX currently has a PEG ratio of 3.75.

Another notable valuation metric for CGEMY 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 13.48.

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

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


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