Investors looking for stocks in the Consulting Services sector might want to consider either Booz Allen Hamilton (BAH) or Gartner (IT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Booz Allen Hamilton is sporting a Zacks Rank of #2 (Buy), while Gartner has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BAH likely has seen a stronger improvement to its earnings outlook than IT has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BAH currently has a forward P/E ratio of 20.74, while IT has a forward P/E of 41.26. We also note that BAH has a PEG ratio of 1.56. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. IT currently has a PEG ratio of 3.07.
Another notable valuation metric for BAH is its P/B ratio of 13.80. 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, IT has a P/B of 35.67.
These metrics, and several others, help BAH earn a Value grade of B, while IT has been given a Value grade of D.
BAH sticks out from IT in both our Zacks Rank and Style Scores models, so value investors will likely feel that BAH is the better option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
