Back to top

Image: Bigstock

CGEMY vs. ADP: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors interested in Outsourcing stocks are likely familiar with Cap Gemini SA (CGEMY - Free Report) and Automatic Data Processing (ADP - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Cap Gemini SA has a Zacks Rank of #1 (Strong Buy), while Automatic Data Processing has a Zacks Rank of #3 (Hold). This means that CGEMY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

CGEMY currently has a forward P/E ratio of 14.98, while ADP has a forward P/E of 26.53. We also note that CGEMY has a PEG ratio of 1.79. 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. ADP currently has a PEG ratio of 2.21.

Another notable valuation metric for CGEMY is its P/B ratio of 3.01. 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, ADP has a P/B of 29.93.

These metrics, and several others, help CGEMY earn a Value grade of B, while ADP has been given a Value grade of C.

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

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

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

Cap Gemini SA (CGEMY) - free report >>

Published in