U.S. Markets open in 16 mins

CVG or ADP: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Zacks.com featured highlights include: Twitter, Lockheed Martin, Intercontinental Exchange, CBRE and Keurig Dr Pepper

Investors interested in stocks from the Outsourcing sector have probably already heard of Convergys (CVG) and Automatic Data Processing (ADP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Convergys is sporting a Zacks Rank of #2 (Buy), while Automatic Data Processing has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CVG is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 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.

CVG currently has a forward P/E ratio of 14.69, while ADP has a forward P/E of 28.43. We also note that CVG has a PEG ratio of 1.96. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ADP currently has a PEG ratio of 2.51.

Another notable valuation metric for CVG is its P/B ratio of 1.68. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ADP has a P/B of 18.71.

These are just a few of the metrics contributing to CVG's Value grade of A and ADP's Value grade of D.

CVG sticks out from ADP in both our Zacks Rank and Style Scores models, so value investors will likely feel that CVG is the better option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Convergys Corporation (CVG) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.