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CPSI or QSII: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Ross Stores (ROST) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Investors interested in stocks from the Medical Info Systems sector have probably already heard of Computer Programs and Systems (CPSI) and Quality Systems (QSII). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, Computer Programs and Systems is sporting a Zacks Rank of #2 (Buy), while Quality Systems has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that CPSI likely has seen a stronger improvement to its earnings outlook than QSII has recently. 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.

CPSI currently has a forward P/E ratio of 14.45, while QSII has a forward P/E of 26.27. We also note that CPSI has a PEG ratio of 1.36. 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. QSII currently has a PEG ratio of 3.23.

Another notable valuation metric for CPSI is its P/B ratio of 3.32. 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, QSII has a P/B of 3.85.

These metrics, and several others, help CPSI earn a Value grade of B, while QSII has been given a Value grade of C.

CPSI has seen stronger estimate revision activity and sports more attractive valuation metrics than QSII, so it seems like value investors will conclude that CPSI is the superior option right now.


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