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SYKE vs. PAYX: Which Stock Should Value Investors Buy Now?

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Investors interested in Outsourcing stocks are likely familiar with Sykes Enterprises (SYKE) and Paychex (PAYX). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

Sykes Enterprises has a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SYKE likely has seen a stronger improvement to its earnings outlook than PAYX has recently. However, value investors will care about much more than just this.

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 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.

SYKE currently has a forward P/E ratio of 10.93, while PAYX has a forward P/E of 21.45. We also note that SYKE has a PEG ratio of 1.09. 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. PAYX currently has a PEG ratio of 3.06.

Another notable valuation metric for SYKE is its P/B ratio of 1.25. 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, PAYX has a P/B of 8.43.

These metrics, and several others, help SYKE earn a Value grade of B, while PAYX has been given a Value grade of D.

SYKE 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 SYKE is likely the superior value option right now.

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