Investors interested in Computers - IT Services stocks are likely familiar with Amdocs (DOX - Free Report) and Infosys (INFY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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.
Amdocs has a Zacks Rank of #2 (Buy), while Infosys has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DOX likely has seen a stronger improvement to its earnings outlook than INFY has recently. But this is only part of the picture 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.
DOX currently has a forward P/E ratio of 15.23, while INFY has a forward P/E of 21.94. We also note that DOX has a PEG ratio of 1.79. 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. INFY currently has a PEG ratio of 2.31.
Another notable valuation metric for DOX is its P/B ratio of 2.60. 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, INFY has a P/B of 6.26.
These metrics, and several others, help DOX earn a Value grade of B, while INFY has been given a Value grade of C.
DOX sticks out from INFY in both our Zacks Rank and Style Scores models, so value investors will likely feel that DOX is the better option right now.