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Investors interested in stocks from the Technology Services sector have probably already heard of Telus International (TIXT) and Evoqua Water (AQUA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Telus International and Evoqua Water are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TIXT has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
TIXT currently has a forward P/E ratio of 19.38, while AQUA has a forward P/E of 37.37. We also note that TIXT has a PEG ratio of 0.99. 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. AQUA currently has a PEG ratio of 2.49.
Another notable valuation metric for TIXT is its P/B ratio of 3.66. 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, AQUA has a P/B of 6.17.
These are just a few of the metrics contributing to TIXT's Value grade of B and AQUA's Value grade of C.
TIXT sticks out from AQUA in both our Zacks Rank and Style Scores models, so value investors will likely feel that TIXT is the better option right now.
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