Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Genpact Limited (G Quick QuoteG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Genpact has a trailing twelve months PE ratio of 18.61, as you can see in the chart below:

GENPACT LTD PE Ratio (TTM)

This level is only slightly favorable compared with the market at large, as the PE ratio for the S&P 500 stands at about 19.84.



If we focus on the stock’s long-term PE trend, the current level puts Genpact’s current PE ratio below its midpoint over the past five years, which stands at 19.41. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.

Further, the stock’s PE also compares favorably with the Zacks categorized Outsourcing industry’s trailing twelve months PE ratio, which stands at 24.74. This indicates that the stock is significantly undervalued right now, compared to its peers. The chart below depicts both the stock’s PE trend over the past five years, and its comparison with the industry PE:



We should also point out that Genpact has a forward PE of a little less – 18.23 – so it is fair to say that a slightly more value-oriented path may be ahead for Genpact stock in the near term too. We define forward PE as current price relative to the Zacks Consensus Estimate for the current fiscal year.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Genpact has a P/S ratio of about 2.00. This is quite a bit lower than the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years and also lower than its own mid-point of 2.11.



To sum up, G seems to be on the lower side of its range in the time period from a P/S metric, suggesting some level of undervalued trading – at least compared to historical norms.

Broad Value Outlook

In aggregate, Genpact currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Genpact a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Genpact is just 1.40, a level that is considerably lower than the industry average of 2.05. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, G is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Genpact might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘B’. This gives G a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics, and a good VGM score can increase your odds of success. All things considered, Genpact seems to have pretty striking prospects.

Meanwhile, the company’s recent earnings estimates have been mixed at best. The full year has seen seven estimates go higher in the past sixty days compared to none lower, while the current quarter has seen one revision upward and two downward in the same time period.

This has had just a small impact on the consensus estimate though, as the full year consensus estimate has inched higher by 1.5% over the past two months, while the current quarter estimate has remained constant. You can see the consensus estimate trend and recent price action for the stock in the chart below:

GENPACT LTD Price and Consensus

Bottom Line

Genpact is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 37% out of more than 250 industries) and a Zacks Rank #3 (Hold), it is hard to get too excited about this company overall.

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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