Investors looking for stocks in the Medical Info Systems sector might want to consider either Computer Programs and Systems (CPSI - Free Report) or Cerner (CERN - 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.
Computer Programs and Systems has a Zacks Rank of #1 (Strong Buy), while Cerner has a Zacks Rank of #5 (Strong Sell) right now. This means that CPSI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
CPSI currently has a forward P/E ratio of 14.26, while CERN has a forward P/E of 24.04. We also note that CPSI has a PEG ratio of 1.34. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CERN currently has a PEG ratio of 1.73.
Another notable valuation metric for CPSI is its P/B ratio of 3.27. 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, CERN has a P/B of 4.08.
Based on these metrics and many more, CPSI holds a Value grade of B, while CERN has a Value grade of C.
CPSI sticks out from CERN in both our Zacks Rank and Style Scores models, so value investors will likely feel that CPSI is the better option right now.