Investors with an interest in Computers - IT Services stocks have likely encountered both SAIC (SAIC - Free Report) and Fair Isaac (FICO - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, SAIC has a Zacks Rank of #2 (Buy), while Fair Isaac has a Zacks Rank of #3 (Hold). This means that SAIC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
SAIC currently has a forward P/E ratio of 14.24, while FICO has a forward P/E of 30.55. We also note that SAIC has a PEG ratio of 2.59. 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. FICO currently has a PEG ratio of 3.05.
Another notable valuation metric for SAIC is its P/B ratio of 6.58. 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, FICO has a P/B of 23.12.
Based on these metrics and many more, SAIC holds a Value grade of A, while FICO has a Value grade of F.
SAIC 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 SAIC is likely the superior value option right now.