Investors interested in Business - Software Services stocks are likely familiar with Wipro Limited (WIT) and Tyler Technologies (TYL). 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.
Wipro Limited has a Zacks Rank of #2 (Buy), while Tyler Technologies has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that WIT is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
WIT currently has a forward P/E ratio of 15.34, while TYL has a forward P/E of 67.73. We also note that WIT has a PEG ratio of 1.70. 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 4.52.
Another notable valuation metric for WIT is its P/B ratio of 2.50. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, TYL has a P/B of 8.13.
Based on these metrics and many more, WIT holds a Value grade of A, while TYL has a Value grade of F.
WIT stands above TYL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WIT is the superior value option right now.
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