Investors interested in stocks from the Consulting Services sector have probably already heard of Information Services Group (III) and Hackett Group (HCKT). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Information Services Group has a Zacks Rank of #2 (Buy), while Hackett Group has a Zacks Rank of #3 (Hold) right now. This means that III's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
III currently has a forward P/E ratio of 18.11, while HCKT has a forward P/E of 22.82. We also note that III has a PEG ratio of 1.29. 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. HCKT currently has a PEG ratio of 1.52.
Another notable valuation metric for III is its P/B ratio of 2.74. 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, HCKT has a P/B of 4.92.
Based on these metrics and many more, III holds a Value grade of B, while HCKT has a Value grade of C.
III has seen stronger estimate revision activity and sports more attractive valuation metrics than HCKT, so it seems like value investors will conclude that III is the superior option right now.
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