Investors interested in stocks from the Computers - IT Services sector have probably already heard of Genpact (G) and Dynatrace (DT). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Genpact has a Zacks Rank of #2 (Buy), while Dynatrace has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that G likely has seen a stronger improvement to its earnings outlook than DT has recently. However, value investors will care about much more than just this.
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 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.
G currently has a forward P/E ratio of 9.55, while DT has a forward P/E of 23.73. We also note that G has a PEG ratio of 1.01. 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. DT currently has a PEG ratio of 1.67.
Another notable valuation metric for G is its P/B ratio of 2.59. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, DT has a P/B of 4.36.
Based on these metrics and many more, G holds a Value grade of A, while DT has a Value grade of F.
G is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that G is likely 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.
