Investors interested in stocks from the Consulting Services sector have probably already heard of Information Services Group (III) and Accenture (ACN). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Information Services Group has a Zacks Rank of #2 (Buy), while Accenture has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that III is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
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.
III currently has a forward P/E ratio of 13.44, while ACN has a forward P/E of 28.68. We also note that III has a PEG ratio of 0.77. 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. ACN currently has a PEG ratio of 2.87.
Another notable valuation metric for III is its P/B ratio of 3.08. 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, ACN has a P/B of 8.80.
These metrics, and several others, help III earn a Value grade of A, while ACN has been given a Value grade of C.
III stands above ACN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that III is the superior value option right now.
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