BBSI vs. ADP: Which Stock Should Value Investors Buy Now?
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 stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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 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. 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 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 18, while ADP has a forward P/E of 33.56. We also note that BBSI has a PEG ratio of 1.50. 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 2.80.
Another notable valuation metric for BBSI is its P/B ratio of 3.09. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ADP has a P/B of 14.97.
Based on these metrics and many more, BBSI holds a Value grade of A, while ADP has a Value grade of C.
BBSI sticks out from ADP in both our Zacks Rank and Style Scores models, so value investors will likely feel that BBSI is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
