BBSI or PAYX: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Outsourcing sector have probably already heard of Barrett Business Services (BBSI) and Paychex (PAYX). 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.
Barrett Business Services has a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #3 (Hold) right now. This means that BBSI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BBSI currently has a forward P/E ratio of 11.86, while PAYX has a forward P/E of 25.22. We also note that BBSI has a PEG ratio of 0.85. 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. PAYX currently has a PEG ratio of 3.36.
Another notable valuation metric for BBSI is its P/B ratio of 3.27. 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, PAYX has a P/B of 11.46.
Based on these metrics and many more, BBSI holds a Value grade of A, while PAYX has a Value grade of C.
BBSI has seen stronger estimate revision activity and sports more attractive valuation metrics than PAYX, so it seems like value investors will conclude that BBSI is the superior option right now.
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Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
Paychex, Inc. (PAYX) : Free Stock Analysis Report
