Investors interested in stocks from the Business - Software Services sector have probably already heard of Cognizant (CTSH) and Wipro Limited (WIT). 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.
Cognizant has a Zacks Rank of #2 (Buy), while Wipro Limited has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that CTSH likely has seen a stronger improvement to its earnings outlook than WIT has recently. But this is just one factor that value investors are interested in.
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.
CTSH currently has a forward P/E ratio of 16.55, while WIT has a forward P/E of 25.12. We also note that CTSH has a PEG ratio of 2.13. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WIT currently has a PEG ratio of 4.54.
Another notable valuation metric for CTSH is its P/B ratio of 2.65. 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, WIT has a P/B of 3.59.
These metrics, and several others, help CTSH earn a Value grade of B, while WIT has been given a Value grade of C.
CTSH stands above WIT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CTSH is the superior value option right now.
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See Stocks Now >>Cognizant Technology Solutions Corporation (CTSH) : Free Stock Analysis Report
Wipro Limited (WIT) : Free Stock Analysis Report
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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.
