Investors interested in stocks from the Business - Services sector have probably already heard of First Data (FDC) and PRGX Global (PRGX). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both First Data and PRGX Global are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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 15.66, while PRGX has a forward P/E of 36.28. We also note that FDC has a PEG ratio of 1.16. 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. PRGX currently has a PEG ratio of 2.42.
Another notable valuation metric for FDC is its P/B ratio of 3.36. 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, PRGX has a P/B of 3.50.
These metrics, and several others, help FDC earn a Value grade of B, while PRGX has been given a Value grade of C.
Both FDC and PRGX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FDC is the superior value option right now.
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