Investors with an interest in Consulting Services stocks have likely encountered both Accenture (ACN - Free Report) and Gartner (IT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Accenture has a Zacks Rank of #2 (Buy), while Gartner has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that ACN likely has seen a stronger improvement to its earnings outlook than IT has recently. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
ACN currently has a forward P/E ratio of 26.07, while IT has a forward P/E of 42.33. We also note that ACN has a PEG ratio of 2.52. 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. IT currently has a PEG ratio of 2.99.
Another notable valuation metric for ACN is its P/B ratio of 9.08. 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, IT has a P/B of 17.62.
These metrics, and several others, help ACN earn a Value grade of B, while IT has been given a Value grade of D.
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.