Investors with an interest in Computers - IT Services stocks have likely encountered both Amdocs (DOX) and Jack Henry (JKHY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Amdocs and Jack Henry 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 just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DOX currently has a forward P/E ratio of 8.78, while JKHY has a forward P/E of 22.67. We also note that DOX has a PEG ratio of 1.03. 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 2.27.
Another notable valuation metric for DOX is its P/B ratio of 2.03. 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, JKHY has a P/B of 4.95.
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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Amdocs Limited (DOX): Free Stock Analysis Report
Jack Henry & Associates, Inc. (JKHY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).