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WIT or GWRE: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Business - Software Services sector might want to consider either Wipro Limited (WIT) or Guidewire Software (GWRE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Wipro Limited and Guidewire Software are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that WIT likely has seen a stronger improvement to its earnings outlook than GWRE has recently. But this is only part of the picture for value investors.

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 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.

WIT currently has a forward P/E ratio of 18.66, while GWRE has a forward P/E of 113.15. We also note that WIT has a PEG ratio of 2.07. 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. GWRE currently has a PEG ratio of 8.08.

Another notable valuation metric for WIT is its P/B ratio of 3.09. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, GWRE has a P/B of 5.79.

Based on these metrics and many more, WIT holds a Value grade of B, while GWRE has a Value grade of F.

WIT stands above GWRE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WIT 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.

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