Investors looking for stocks in the Outsourcing sector might want to consider either Convergys (CVG) or Broadridge Financial Solutions (BR). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Convergys and Broadridge Financial Solutions are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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 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.
CVG currently has a forward P/E ratio of 14.14, while BR has a forward P/E of 27.55. We also note that CVG has a PEG ratio of 1.57. 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. BR currently has a PEG ratio of 2.76.
Another notable valuation metric for CVG is its P/B ratio of 1.59. 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, BR has a P/B of 11.76.
These are just a few of the metrics contributing to CVG's Value grade of B and BR's Value grade of D.
Both CVG and BR are impressive stocks with improving earnings outlooks. But considering the above metrics, value investors will likely feel that CVG is the better option right now.
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