Investors with an interest in Technology Services stocks have likely encountered both Parsons (PSN) and Ralliant (RAL). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Parsons and Ralliant are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
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.
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.
PSN currently has a forward P/E ratio of 16.22, while RAL has a forward P/E of 27.18. We also note that PSN has a PEG ratio of 1.52. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RAL currently has a PEG ratio of 3.22.
Another notable valuation metric for PSN is its P/B ratio of 2.06. 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, RAL has a P/B of 5.12.
Based on these metrics and many more, PSN holds a Value grade of A, while RAL has a Value grade of C.
Both PSN and RAL are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PSN is the superior value option right now.
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Parsons Corporation (PSN): Free Stock Analysis Report
Ralliant Corporation (RAL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).