Investors with an interest in Computers - IT Services stocks have likely encountered both Epam (EPAM) and Infosys (INFY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Epam has a Zacks Rank of #2 (Buy), while Infosys has a Zacks Rank of #3 (Hold) right now. This means that EPAM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
EPAM currently has a forward P/E ratio of 16.34, while INFY has a forward P/E of 21.69. We also note that EPAM has a PEG ratio of 2.00. 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. INFY currently has a PEG ratio of 2.86.
Another notable valuation metric for EPAM is its P/B ratio of 2.78. 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, INFY has a P/B of 6.13.
These are just a few of the metrics contributing to EPAM's Value grade of B and INFY's Value grade of C.
EPAM has seen stronger estimate revision activity and sports more attractive valuation metrics than INFY, so it seems like value investors will conclude that EPAM is the superior option right now.
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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.
