Investors with an interest in Computer - Services stocks have likely encountered both Carbonite and Virtusa (VRTU - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Carbonite has a Zacks Rank of #2 (Buy), while Virtusa has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CARB likely has seen a stronger improvement to its earnings outlook than VRTU has recently. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
CARB currently has a forward P/E ratio of 13.58, while VRTU has a forward P/E of 16.39. We also note that CARB has a PEG ratio of 0.68. 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. VRTU currently has a PEG ratio of 0.82.
Another notable valuation metric for CARB is its P/B ratio of 3.26. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, VRTU has a P/B of 3.37.
These metrics, and several others, help CARB earn a Value grade of B, while VRTU has been given a Value grade of C.
CARB stands above VRTU thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CARB is the superior value option right now.