Investors with an interest in Internet - Software stocks have likely encountered both NIC (EGOV - Free Report) and Paycom Software (PAYC - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, NIC is sporting a Zacks Rank of #2 (Buy), while Paycom Software 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 EGOV has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
EGOV currently has a forward P/E ratio of 28.58, while PAYC has a forward P/E of 62.12. We also note that EGOV has a PEG ratio of 1.59. 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. PAYC currently has a PEG ratio of 2.26.
Another notable valuation metric for EGOV is its P/B ratio of 6.05. 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, PAYC has a P/B of 28.62.
These are just a few of the metrics contributing to EGOV's Value grade of B and PAYC's Value grade of F.
EGOV stands above PAYC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EGOV is the superior value option right now.