Investors looking for stocks in the Computers - IT Services sector might want to consider either SAIC (SAIC - Free Report) or CoStar Group (CSGP - 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, SAIC is sporting a Zacks Rank of #2 (Buy), while CoStar Group has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SAIC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
SAIC currently has a forward P/E ratio of 15.18, while CSGP has a forward P/E of 60.91. We also note that SAIC has a PEG ratio of 2.76. 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. CSGP currently has a PEG ratio of 4.06.
Another notable valuation metric for SAIC is its P/B ratio of 3.55. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CSGP has a P/B of 6.75.
These metrics, and several others, help SAIC earn a Value grade of B, while CSGP has been given a Value grade of F.
SAIC has seen stronger estimate revision activity and sports more attractive valuation metrics than CSGP, so it seems like value investors will conclude that SAIC is the superior option right now.