Investors interested in stocks from the Outsourcing sector have probably already heard of Convergys (CVG - Free Report) and Genpact (G - 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Convergys is sporting a Zacks Rank of #2 (Buy), while Genpact 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 CVG is likely seeing its earnings outlook improve to a greater extent. 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.
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.
CVG currently has a forward P/E ratio of 15.14, while G has a forward P/E of 19. We also note that CVG has a PEG ratio of 1.68. 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 1.90.
Another notable valuation metric for CVG is its P/B ratio of 1.70. 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, G has a P/B of 4.18.
These metrics, and several others, help CVG earn a Value grade of B, while G has been given a Value grade of C.
CVG stands above G thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CVG is the superior value option right now.