Investors interested in Consulting Services stocks are likely familiar with Information Services Group (III - Free Report) and Hackett Group (HCKT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Information Services Group is sporting a Zacks Rank of #1 (Strong Buy), while Hackett Group has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that III has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
III currently has a forward P/E ratio of 10.33, while HCKT has a forward P/E of 13.89. We also note that III has a PEG ratio of 0.74. 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. HCKT currently has a PEG ratio of 0.93.
Another notable valuation metric for III is its P/B ratio of 2.41. 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, HCKT has a P/B of 3.69.
These are just a few of the metrics contributing to III's Value grade of B and HCKT's Value grade of C.
III has seen stronger estimate revision activity and sports more attractive valuation metrics than HCKT, so it seems like value investors will conclude that III is the superior option right now.