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RXT or TRI: Which Is the Better Value Stock Right Now?

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Investors interested in Technology Services stocks are likely familiar with Rackspace (RXT) and Thomson Reuters (TRI). 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.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Rackspace has a Zacks Rank of #2 (Buy), while Thomson Reuters has a Zacks Rank of #3 (Hold). This means that RXT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

RXT currently has a forward P/E ratio of 15.87, while TRI has a forward P/E of 59.97. We also note that RXT has a PEG ratio of 1.22. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TRI currently has a PEG ratio of 4.98.

Another notable valuation metric for RXT is its P/B ratio of 2.27. 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, TRI has a P/B of 3.62.

Based on these metrics and many more, RXT holds a Value grade of A, while TRI has a Value grade of D.

RXT has seen stronger estimate revision activity and sports more attractive valuation metrics than TRI, so it seems like value investors will conclude that RXT is the superior option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Rackspace Technology, Inc. (RXT) : Free Stock Analysis Report
Thomson Reuters Corp (TRI) : Free Stock Analysis Report
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