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

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Investors looking for stocks in the Outsourcing sector might want to consider either Cap Gemini SA (CGEMY - Free Report) or 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

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 only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

CGEMY currently has a forward P/E ratio of 18.06, while PAYX has a forward P/E of 25.95. We also note that CGEMY has a PEG ratio of 2.48. 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 3.31.

Another notable valuation metric for CGEMY is its P/B ratio of 3.57. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, PAYX has a P/B of 12.50.

Based on these metrics and many more, CGEMY holds a Value grade of B, while PAYX has a 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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