Investors interested in Computers - IT Services stocks are likely familiar with Amdocs (DOX) and CoStar Group (CSGP). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Amdocs and CoStar Group are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DOX currently has a forward P/E ratio of 10.85, while CSGP has a forward P/E of 96.22. We also note that DOX has a PEG ratio of 1.23. 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. CSGP currently has a PEG ratio of 2.26.
Another notable valuation metric for DOX is its P/B ratio of 2.62. 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, CSGP has a P/B of 4.
These metrics, and several others, help DOX earn a Value grade of B, while CSGP has been given a Value grade of F.
Both DOX and CSGP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DOX is the superior value option right now.
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Today, See These 5 Potential Home Runs >>Amdocs Limited (DOX) : Free Stock Analysis Report
CoStar Group, Inc. (CSGP) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
