Investors looking for stocks in the Computers - IT Services sector might want to consider either TaskUs (TASK) or Dynatrace (DT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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.
Right now, TaskUs is sporting a Zacks Rank of #2 (Buy), while Dynatrace has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TASK 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.
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.
TASK currently has a forward P/E ratio of 10.29, while DT has a forward P/E of 30.93. We also note that TASK has a PEG ratio of 1.20. 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 2.43.
Another notable valuation metric for TASK 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 5.55.
These metrics, and several others, help TASK earn a Value grade of A, while DT has been given a Value grade of F.
TASK has seen stronger estimate revision activity and sports more attractive valuation metrics than DT, so it seems like value investors will conclude that TASK is the superior 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.
