Investors looking for stocks in the Computer - Services sector might want to consider either CACI International (CACI) or CGI Group (GIB). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both CACI International and CGI Group are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
CACI currently has a forward P/E ratio of 16.98, while GIB has a forward P/E of 18.94. We also note that CACI has a PEG ratio of 1.70. 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. GIB currently has a PEG ratio of 2.10.
Another notable valuation metric for CACI is its P/B ratio of 1.93. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, GIB has a P/B of 3.57.
These metrics, and several others, help CACI earn a Value grade of A, while GIB has been given a Value grade of C.
Both CACI and GIB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CACI is the superior value option right now.
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