Investors with an interest in Outsourcing stocks have likely encountered both Convergys (CVG - Free Report) and Genpact (G - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Convergys has a Zacks Rank of #2 (Buy), while Genpact has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CVG likely has seen a stronger improvement to its earnings outlook than G has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
CVG currently has a forward P/E ratio of 14.75, while G has a forward P/E of 17.39. We also note that CVG has a PEG ratio of 1.64. 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. G currently has a PEG ratio of 1.74.
Another notable valuation metric for CVG is its P/B ratio of 1.66. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, G has a P/B of 4.30.
These are just a few of the metrics contributing to CVG's Value grade of A and G's Value grade of C.
CVG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CVG is likely the superior value option right now.