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Cognizant Technology Solutions Corporation (CTSH) - free report >>
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Cognizant Technology Solutions Corporation (CTSH) - free report >>
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CTSH vs. WIT: Which Stock Is the Better Value Option?
Investors looking for stocks in the Business - Software Services sector might want to consider either Cognizant (CTSH - Free Report) or Wipro Limited (WIT - Free Report) . 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Cognizant has a Zacks Rank of #2 (Buy), while Wipro Limited has a Zacks Rank of #3 (Hold) right now. This means that CTSH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
CTSH currently has a forward P/E ratio of 13.32, while WIT has a forward P/E of 18.26. We also note that CTSH has a PEG ratio of 1.21. 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. WIT currently has a PEG ratio of 2.03.
Another notable valuation metric for CTSH is its P/B ratio of 2.63. 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, WIT has a P/B of 3.10.
Based on these metrics and many more, CTSH holds a Value grade of A, while WIT has a Value grade of C.
CTSH stands above WIT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CTSH is the superior value option right now.