CTSH vs. EPAM: Which Stock Is the Better Value Option?

Investors looking for stocks in the Computers - IT Services sector might want to consider either Cognizant (CTSH) or Epam (EPAM). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.

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Cognizant and Epam are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CTSH has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

CTSH currently has a forward P/E ratio of 15.28, while EPAM has a forward P/E of 15.96. We also note that CTSH has a PEG ratio of 1.77. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EPAM currently has a PEG ratio of 1.79.

Another notable valuation metric for CTSH is its P/B ratio of 2.57. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, EPAM has a P/B of 2.73.

These metrics, and several others, help CTSH earn a Value grade of B, while EPAM has been given a Value grade of C.

CTSH 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 CTSH is likely the superior value option right now.

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Cognizant Technology Solutions Corporation (CTSH) : Free Stock Analysis Report

EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report

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

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