Investors looking for stocks in the Technology Services sector might want to consider either Ntt Data Corporation (NTDTY) or Thomson Reuters (TRI). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Ntt Data Corporation and Thomson Reuters are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NTDTY 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 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 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.
NTDTY currently has a forward P/E ratio of 23.32, while TRI has a forward P/E of 72.80. We also note that NTDTY has a PEG ratio of 2.92. 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. TRI currently has a PEG ratio of 13.24.
Another notable valuation metric for NTDTY is its P/B ratio of 2.33. 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, TRI has a P/B of 2.72.
These are just a few of the metrics contributing to NTDTY's Value grade of B and TRI's Value grade of D.
NTDTY stands above TRI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NTDTY is the superior value option right now.
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