Investors with an interest in Business - Software Services stocks have likely encountered both Synnex (SNX) and Tyler Technologies (TYL). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Synnex has a Zacks Rank of #2 (Buy), while Tyler Technologies has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SNX has an improving earnings outlook. 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.
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.
SNX currently has a forward P/E ratio of 8.99, while TYL has a forward P/E of 42.74. We also note that SNX has a PEG ratio of 0.75. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TYL currently has a PEG ratio of 4.27.
Another notable valuation metric for SNX is its P/B ratio of 1.56. 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, TYL has a P/B of 6.62.
These are just a few of the metrics contributing to SNX's Value grade of B and TYL's Value grade of F.
SNX stands above TYL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SNX is the superior value option right now.
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