Investors with an interest in Outsourcing stocks have likely encountered both ExlService Holdings (EXLS) and Paychex (PAYX). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, ExlService Holdings has a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that EXLS 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 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
EXLS currently has a forward P/E ratio of 16.32, while PAYX has a forward P/E of 22.19. We also note that EXLS has a PEG ratio of 1.36. 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. PAYX currently has a PEG ratio of 2.77.
Another notable valuation metric for EXLS is its P/B ratio of 2.80. 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, PAYX has a P/B of 8.70.
These are just a few of the metrics contributing to EXLS's Value grade of B and PAYX's Value grade of D.
EXLS 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 EXLS is likely the superior value option right now.
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ExlService Holdings, Inc. (EXLS) : Free Stock Analysis Report
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