Investors interested in Computers – IT Services stocks are likely familiar with Cognizant (CTSH) and Wipro Limited (WIT). 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.
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.
Cognizant and Wipro Limited are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CTSH has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CTSH currently has a forward P/E ratio of 10.87, while WIT has a forward P/E of 15.70. We also note that CTSH has a PEG ratio of 1.33. 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. WIT currently has a PEG ratio of 6.18.
Another notable valuation metric for CTSH is its P/B ratio of 1.96. 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, WIT has a P/B of 2.36.
These are just a few of the metrics contributing to CTSH’s Value grade of A and WIT’s Value grade of C.
CTSH 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 CTSH is likely the superior value option right now.
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