G vs. ADP: Which Stock Is the Better Value Option?

Investors looking for stocks in the Outsourcing sector might want to consider either Genpact (G) or Automatic Data Processing (ADP). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Genpact is sporting a Zacks Rank of #2 (Buy), while Automatic Data Processing has a Zacks Rank of #3 (Hold). This means that G’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 also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

G currently has a forward P/E ratio of 19.45, while ADP has a forward P/E of 28.10. We also note that G has a PEG ratio of 1.95. 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. ADP currently has a PEG ratio of 2.48.

Another notable valuation metric for G is its P/B ratio of 4.45. 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, ADP has a P/B of 18.53.

These metrics, and several others, help G earn a Value grade of A, while ADP has been given a Value grade of C.

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

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