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CTSH or WIT: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Business - Software Services sector might want to consider either Cognizant (CTSH - Free Report) or Wipro Limited (WIT - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Cognizant is sporting a Zacks Rank of #2 (Buy), while Wipro Limited has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CTSH is likely seeing its earnings outlook improve to a greater extent. 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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CTSH currently has a forward P/E ratio of 15.26, while WIT has a forward P/E of 18.36. We also note that CTSH has a PEG ratio of 1.74. 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. WIT currently has a PEG ratio of 2.04.

Another notable valuation metric for CTSH is its P/B ratio of 2.63. 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, WIT has a P/B of 3.24.

Based on these metrics and many more, CTSH holds a Value grade of B, while WIT has a Value grade of C.

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


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