Investors looking for stocks in the Computer - Services sector might want to consider either CACI International (CACI - Free Report) or CGI Group (GIB - 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 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.
Currently, CACI International has a Zacks Rank of #2 (Buy), while CGI Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CACI likely has seen a stronger improvement to its earnings outlook than GIB has recently. 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 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.
CACI currently has a forward P/E ratio of 15.23, while GIB has a forward P/E of 18.31. We also note that CACI has a PEG ratio of 1.52. 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. GIB currently has a PEG ratio of 2.03.
Another notable valuation metric for CACI is its P/B ratio of 1.76. 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, GIB has a P/B of 3.48.
These metrics, and several others, help CACI earn a Value grade of B, while GIB has been given a Value grade of C.
CACI 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 CACI is likely the superior value option right now.