Investors interested in stocks from the Computers - IT Services sector have probably already heard of SAIC (SAIC) and Fair Isaac (FICO). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, SAIC is sporting a Zacks Rank of #1 (Strong Buy), while Fair Isaac has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SAIC likely has seen a stronger improvement to its earnings outlook than FICO has recently. But this is just one factor that value investors are interested in.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SAIC currently has a forward P/E ratio of 15.28, while FICO has a forward P/E of 37.31. We also note that SAIC has a PEG ratio of 2.78. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FICO currently has a PEG ratio of 3.73.
Another notable valuation metric for SAIC is its P/B ratio of 7.59. 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 32.89.
These metrics, and several others, help SAIC earn a Value grade of B, while FICO has been given a Value grade of F.
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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