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CPSI vs. TRHC: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Medical Info Systems sector might want to consider either Computer Programs and Systems or Tabula Rasa Healthcare . 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 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.

Computer Programs and Systems and Tabula Rasa Healthcare are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CPSI has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

CPSI currently has a forward P/E ratio of 10.91, while TRHC has a forward P/E of 81.22. We also note that CPSI has a PEG ratio of 1.06. 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. TRHC currently has a PEG ratio of 3.25.

Another notable valuation metric for CPSI is its P/B ratio of 2.35. 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, TRHC has a P/B of 12.84.

Based on these metrics and many more, CPSI holds a Value grade of A, while TRHC has a Value grade of F.

CPSI has seen stronger estimate revision activity and sports more attractive valuation metrics than TRHC, so it seems like value investors will conclude that CPSI is the superior option right now.

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