Investors interested in Computers - IT Services stocks are likely familiar with PERSPECTA INC (PRSP - Free Report) and Epam (EPAM - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both PERSPECTA INC and Epam are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PRSP currently has a forward P/E ratio of 11, while EPAM has a forward P/E of 32.72. We also note that PRSP has a PEG ratio of 1.38. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EPAM currently has a PEG ratio of 1.67.
Another notable valuation metric for PRSP is its P/B ratio of 1.75. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, EPAM has a P/B of 6.98.
These metrics, and several others, help PRSP earn a Value grade of A, while EPAM has been given a Value grade of D.
Both PRSP and EPAM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PRSP is the superior value option right now.