Investors interested in Computer - Services stocks are likely familiar with CACI International (CACI - Free Report) and CGI Group (GIB - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.
Currently, both CACI International and CGI Group are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
CACI currently has a forward P/E ratio of 17.35, while GIB has a forward P/E of 18.55. We also note that CACI has a PEG ratio of 1.73. 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. GIB currently has a PEG ratio of 2.06.
Another notable valuation metric for CACI is its P/B ratio of 1.97. 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, GIB has a P/B of 3.50.
Based on these metrics and many more, CACI holds a Value grade of A, while GIB has a Value grade of C.
Both CACI and GIB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CACI is the superior value option right now.