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BBSI vs. PAYX: Which Stock Should Value Investors Buy Now?

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Zacks Equity Research
·2 min read
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Investors interested in Outsourcing stocks are likely familiar with Barrett Business Services (BBSI) and Paychex (PAYX). 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 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 Paychex 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 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.

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.

BBSI currently has a forward P/E ratio of 18.14, while PAYX has a forward P/E of 26.74. We also note that BBSI has a PEG ratio of 1.51. 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. PAYX currently has a PEG ratio of 3.34.

Another notable valuation metric for BBSI is its P/B ratio of 2.46. 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 9.47.

These metrics, and several others, help BBSI earn a Value grade of A, while PAYX has been given a Value grade of D.

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
 
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Zacks Investment Research