CGEMY vs. PAYX: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Outsourcing sector might want to consider either Cap Gemini SA (CGEMY) or Paychex (PAYX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Cap Gemini SA and Paychex are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CGEMY is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
CGEMY currently has a forward P/E ratio of 16.35, while PAYX has a forward P/E of 25.27. We also note that CGEMY has a PEG ratio of 2.24. 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 3.22.
Another notable valuation metric for CGEMY is its P/B ratio of 3.23. 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 12.16.
Based on these metrics and many more, CGEMY holds a Value grade of A, while PAYX has a Value grade of D.
CGEMY 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 CGEMY is likely the superior value option right now.
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Cap Gemini SA (CGEMY) : Free Stock Analysis Report
Paychex, Inc. (PAYX) : Free Stock Analysis Report
