Investors with an interest in Outsourcing stocks have likely encountered both Broadridge Financial Solutions (BR) 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Broadridge Financial Solutions and Paychex are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BR likely has seen a stronger improvement to its earnings outlook than PAYX has recently. But this is just one factor that value investors are interested in.
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 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.
BR currently has a forward P/E ratio of 25.16, while PAYX has a forward P/E of 29.55. We also note that BR has a PEG ratio of 2.52. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PAYX currently has a PEG ratio of 3.28.
Another notable valuation metric for BR is its P/B ratio of 10.70. 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, PAYX has a P/B of 11.65.
These metrics, and several others, help BR earn a Value grade of B, while PAYX has been given a Value grade of D.
BR 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 BR is likely the superior value option right now.
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Broadridge Financial Solutions, Inc. (BR) : Free Stock Analysis Report
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