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G vs. ADP: Which Stock Should Value Investors Buy Now?

Investors with an interest in Outsourcing stocks have likely encountered both Genpact (G) and Automatic Data Processing (ADP). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both Genpact and Automatic Data Processing are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.

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.

G currently has a forward P/E ratio of 15.30, while ADP has a forward P/E of 26.52. We also note that G has a PEG ratio of 1.53. 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. ADP currently has a PEG ratio of 2.16.

Another notable valuation metric for G is its P/B ratio of 3.92. 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, ADP has a P/B of 17.48.

These metrics, and several others, help G earn a Value grade of B, while ADP has been given a Value grade of D.

Both G and ADP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that G is the superior value option right now.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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