Investors with an interest in Computers – IT Services stocks have likely encountered both SAIC (SAIC) and Fair Isaac (FICO). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 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.
SAIC has a Zacks Rank of #2 (Buy), while Fair Isaac has a Zacks Rank of #3 (Hold) right now. This means that SAIC’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
SAIC currently has a forward P/E ratio of 13.59, while FICO has a forward P/E of 33.21. We also note that SAIC has a PEG ratio of 2.47. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. FICO currently has a PEG ratio of 3.32.
Another notable valuation metric for SAIC is its P/B ratio of 7. 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, FICO has a P/B of 25.09.
These metrics, and several others, help SAIC earn a Value grade of A, while FICO has been given a Value grade of F.
SAIC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SAIC is likely the superior value option right now.
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