U.S. Markets closed

WIT or QTWO: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Investors interested in Business - Software Services stocks are likely familiar with Wipro Limited (WIT) and Q2 Holdings (QTWO). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Wipro Limited has a Zacks Rank of #2 (Buy), while Q2 Holdings has a Zacks Rank of #3 (Hold). This means that WIT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

WIT currently has a forward P/E ratio of 20.02, while QTWO has a forward P/E of 413.37. We also note that WIT has a PEG ratio of 2.07. 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. QTWO currently has a PEG ratio of 20.67.

Another notable valuation metric for WIT is its P/B ratio of 3.27. 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, QTWO has a P/B of 17.48.

These are just a few of the metrics contributing to WIT's Value grade of B and QTWO's Value grade of F.

WIT sticks out from QTWO in both our Zacks Rank and Style Scores models, so value investors will likely feel that WIT is the better option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Wipro Limited (WIT) : Free Stock Analysis Report
 
Q2 Holdings, Inc. (QTWO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.