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SYKE vs. ADP: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Outsourcing sector might want to consider either Sykes Enterprises (SYKE) or Automatic Data Processing (ADP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, Sykes Enterprises has a Zacks Rank of #1 (Strong Buy), while Automatic Data Processing has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SYKE has an improving earnings outlook. 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.

SYKE currently has a forward P/E ratio of 15.55, while ADP has a forward P/E of 27.08. We also note that SYKE has a PEG ratio of 1.94. 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. ADP currently has a PEG ratio of 2.26.

Another notable valuation metric for SYKE is its P/B ratio of 1.51. 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, ADP has a P/B of 10.20.

Based on these metrics and many more, SYKE holds a Value grade of B, while ADP has a Value grade of C.

SYKE sticks out from ADP in both our Zacks Rank and Style Scores models, so value investors will likely feel that SYKE is the better 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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Zacks Investment Research