Investors interested in Outsourcing stocks are likely familiar with Convergys and Paychex (PAYX - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Convergys and Paychex are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CVG currently has a forward P/E ratio of 14.52, while PAYX has a forward P/E of 25.32. We also note that CVG has a PEG ratio of 1.94. 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. PAYX currently has a PEG ratio of 3.09.
Another notable valuation metric for CVG is its P/B ratio of 1.66. 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, PAYX has a P/B of 12.76.
Based on these metrics and many more, CVG holds a Value grade of A, while PAYX has a Value grade of F.
Both CVG and PAYX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CVG is the superior value option right now.