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G vs. PAYX: Which Stock Is the Better Value Option?

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Investors with an interest in Outsourcing stocks have likely encountered both Genpact (G - Free Report) and Paychex (PAYX - Free Report) . 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.

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, Genpact has a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that G has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

G currently has a forward P/E ratio of 10.69, while PAYX has a forward P/E of 23.74. We also note that G has a PEG ratio of 1.35. 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. PAYX currently has a PEG ratio of 3.13.

Another notable valuation metric for G is its P/B ratio of 2.55. 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, PAYX has a P/B of 11.20.

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

G is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that G is likely the superior value option right now.


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