Investors with an interest in Computers - IT Services stocks have likely encountered both Amdocs (DOX) and Infosys (INFY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Amdocs has a Zacks Rank of #2 (Buy), while Infosys has a Zacks Rank of #4 (Sell). This means that DOX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
DOX currently has a forward P/E ratio of 8.87, while INFY has a forward P/E of 16.57. We also note that DOX has a PEG ratio of 1.04. 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. INFY currently has a PEG ratio of 1.79.
Another notable valuation metric for DOX is its P/B ratio of 2.06. 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, INFY has a P/B of 6.1.
These are just a few of the metrics contributing to DOX's Value grade of A and INFY's Value grade of C.
DOX stands above INFY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DOX is the superior value option right now.
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Amdocs Limited (DOX): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).