Investors with an interest in Business - Software Services stocks have likely encountered both 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Cognizant is sporting a Zacks Rank of #2 (Buy), while Wipro Limited has a Zacks Rank of #3 (Hold). This means that CTSH'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 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.
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.
CTSH currently has a forward P/E ratio of 17.17, while WIT has a forward P/E of 26.47. We also note that CTSH has a PEG ratio of 2.20. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. WIT currently has a PEG ratio of 4.79.
Another notable valuation metric for CTSH is its P/B ratio of 2.74. 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 3.78.
These are just a few of the metrics contributing to CTSH's Value grade of B and WIT's Value grade of C.
CTSH sticks out from WIT in both our Zacks Rank and Style Scores models, so value investors will likely feel that CTSH is the better option right now.
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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.
