DOX vs. JKHY: Which Stock Is the Better Value Option?

Investors interested in Computers - IT Services stocks are likely familiar with Amdocs (DOX) and Jack Henry (JKHY). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Amdocs and Jack Henry are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

DOX currently has a forward P/E ratio of 6.95, while JKHY has a forward P/E of 20.86. We also note that DOX has a PEG ratio of 0.79. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. JKHY currently has a PEG ratio of 2.09.

Another notable valuation metric for DOX is its P/B ratio of 1.63. 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, JKHY has a P/B of 4.94.

These are just a few of the metrics contributing to DOX's Value grade of A and JKHY's Value grade of C.

Both DOX and JKHY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DOX is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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