Investors interested in stocks from the Outsourcing sector have probably already heard of Atento (ATTO - Free Report) and Automatic Data Processing (ADP - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Atento and Automatic Data Processing have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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.
ATTO currently has a forward P/E ratio of 5, while ADP has a forward P/E of 27.79. We also note that ATTO has a PEG ratio of 0.65. 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. ADP currently has a PEG ratio of 2.18.
Another notable valuation metric for ATTO is its P/B ratio of 0.85. 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, ADP has a P/B of 13.65.
These metrics, and several others, help ATTO earn a Value grade of A, while ADP has been given a Value grade of C.
Both ATTO and ADP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ATTO is the superior value option right now.