Investors interested in stocks from the Business - Information Services sector have probably already heard of FactSet Research (FDS) and Verisk Analytics (VRSK). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, FactSet Research is sporting a Zacks Rank of #2 (Buy), while Verisk Analytics has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FDS is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
FDS currently has a forward P/E ratio of 13.01, while VRSK has a forward P/E of 23.16. We also note that FDS has a PEG ratio of 1.99. 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. VRSK currently has a PEG ratio of 2.13.
Another notable valuation metric for FDS is its P/B ratio of 3.93. 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, VRSK has a P/B of 79.48.
These metrics, and several others, help FDS earn a Value grade of B, while VRSK has been given a Value grade of C.
FDS 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 FDS is likely the superior value option right now.
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FactSet Research Systems Inc. (FDS): Free Stock Analysis Report
Verisk Analytics, Inc. (VRSK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).