Investors interested in Computers - IT Services stocks are likely familiar with SAIC (SAIC) and Fair Isaac (FICO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
SAIC has a Zacks Rank of #2 (Buy), while Fair Isaac has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SAIC likely has seen a stronger improvement to its earnings outlook than FICO has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
SAIC currently has a forward P/E ratio of 14.84, while FICO has a forward P/E of 32.96. We also note that SAIC has a PEG ratio of 2.97. 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. FICO currently has a PEG ratio of 3.30.
Another notable valuation metric for SAIC is its P/B ratio of 7.94. 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, FICO has a P/B of 18.78.
Based on these metrics and many more, SAIC holds a Value grade of B, while FICO has a Value grade of D.
SAIC sticks out from FICO in both our Zacks Rank and Style Scores models, so value investors will likely feel that SAIC is the better option right now.
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (SAIC): Free Stock Analysis Report
Fair Isaac Corporation (FICO): Free Stock Analysis Report
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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.
