Investors interested in Business - Services stocks are likely familiar with First Data (FDC) and Healthcare Services (HCSG). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
First Data and Healthcare Services are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FDC has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
FDC currently has a forward P/E ratio of 16.88, while HCSG has a forward P/E of 26.58. We also note that FDC has a PEG ratio of 1.41. 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. HCSG currently has a PEG ratio of 2.42.
Another notable valuation metric for FDC is its P/B ratio of 3.50. 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, HCSG has a P/B of 5.53.
These metrics, and several others, help FDC earn a Value grade of B, while HCSG has been given a Value grade of C.
FDC has seen stronger estimate revision activity and sports more attractive valuation metrics than HCSG, so it seems like value investors will conclude that FDC is the superior option right now.
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First Data Corporation (FDC) : Free Stock Analysis Report
Healthcare Services Group, Inc. (HCSG) : Free Stock Analysis Report
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