Investors looking for stocks in the Computers - IT Services sector might want to consider either Epam (EPAM) or 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.
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 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.
Currently, Epam has a Zacks Rank of #2 (Buy), while Infosys has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EPAM has an improving earnings outlook. But this is just one piece of the puzzle 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.
EPAM currently has a forward P/E ratio of 15.25, while INFY has a forward P/E of 21.20. We also note that EPAM has a PEG ratio of 1.80. 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. INFY currently has a PEG ratio of 2.48.
Another notable valuation metric for EPAM is its P/B ratio of 2.86. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, INFY has a P/B of 7.24.
These metrics, and several others, help EPAM earn a Value grade of B, while INFY has been given a Value grade of C.
EPAM stands above INFY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EPAM is the superior value 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.
