Investors with an interest in Outsourcing stocks have likely encountered both Barrett Business Services (BBSI) and Automatic Data Processing (ADP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Barrett Business Services has a Zacks Rank of #2 (Buy), while Automatic Data Processing has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BBSI is likely seeing its earnings outlook improve to a greater extent. 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.
BBSI currently has a forward P/E ratio of 14.96, while ADP has a forward P/E of 27.34. We also note that BBSI has a PEG ratio of 1.25. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ADP currently has a PEG ratio of 2.10.
Another notable valuation metric for BBSI is its P/B ratio of 4.23. 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, ADP has a P/B of 13.61.
Based on these metrics and many more, BBSI holds a Value grade of A, while ADP has a Value grade of D.
BBSI stands above ADP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBSI is the superior value option right now.
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Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
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