Investors interested in stocks from the Consulting Services sector have probably already heard of Accenture (ACN - Free Report) and Gartner (IT - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Accenture is sporting a Zacks Rank of #2 (Buy), while Gartner has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ACN has an improving earnings outlook. However, value investors will care about much more than just this.
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.
ACN currently has a forward P/E ratio of 24.71, while IT has a forward P/E of 40.17. We also note that ACN has a PEG ratio of 2.39. 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. IT currently has a PEG ratio of 2.83.
Another notable valuation metric for ACN is its P/B ratio of 8.83. 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, IT has a P/B of 16.82.
These are just a few of the metrics contributing to ACN's Value grade of B and IT's Value grade of F.
ACN 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 ACN is likely the superior value option right now.