Investors looking for stocks in the Computers - IT Services sector might want to consider either ExlService Holdings (EXLS) or ServiceNow (NOW). 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.
ExlService Holdings and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that EXLS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
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.
EXLS currently has a forward P/E ratio of 13.20, while NOW has a forward P/E of 27.60. We also note that EXLS has a PEG ratio of 1.00. 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. NOW currently has a PEG ratio of 1.07.
Another notable valuation metric for EXLS is its P/B ratio of 5.78. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NOW has a P/B of 10.04.
These are just a few of the metrics contributing to EXLS's Value grade of B and NOW's Value grade of D.
EXLS sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that EXLS is the better option right now.
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ExlService Holdings, Inc. (EXLS): Free Stock Analysis Report
ServiceNow, Inc. (NOW): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).