Investors interested in stocks from the Consulting Services sector have probably already heard of CRA International (CRAI) and Gartner (IT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
CRA International and Gartner are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CRAI 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.
CRAI currently has a forward P/E ratio of 25.48, while IT has a forward P/E of 43.05. We also note that CRAI has a PEG ratio of 1.59. 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. IT currently has a PEG ratio of 3.11.
Another notable valuation metric for CRAI is its P/B ratio of 6.24. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, IT has a P/B of 59.73.
Based on these metrics and many more, CRAI holds a Value grade of B, while IT has a Value grade of D.
CRAI sticks out from IT in both our Zacks Rank and Style Scores models, so value investors will likely feel that CRAI 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.
