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SYKE vs. ADP: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 min read

Investors with an interest in Outsourcing stocks have likely encountered both Sykes Enterprises (SYKE) and Automatic Data Processing (ADP). 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.

Both Sykes Enterprises and Automatic Data Processing have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

SYKE currently has a forward P/E ratio of 14.65, while ADP has a forward P/E of 31.09. We also note that SYKE has a PEG ratio of 1.46. 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. ADP currently has a PEG ratio of 2.59.

Another notable valuation metric for SYKE is its P/B ratio of 1.81. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ADP has a P/B of 12.94.

These metrics, and several others, help SYKE earn a Value grade of A, while ADP has been given a Value grade of D.

Both SYKE and ADP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SYKE is the superior value option right now.


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Sykes Enterprises, Incorporated (SYKE) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
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