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SYKE or ADP: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2-min read

Investors with an interest in Outsourcing stocks have likely encountered both Sykes Enterprises (SYKE) and Automatic Data Processing (ADP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Sykes Enterprises has a Zacks Rank of #1 (Strong Buy), while Automatic Data Processing has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that SYKE likely has seen a stronger improvement to its earnings outlook than ADP has recently. But this is just one piece of the puzzle for value investors.

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.

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The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SYKE currently has a forward P/E ratio of 13.82, while ADP has a forward P/E of 26.12. We also note that SYKE has a PEG ratio of 1.73. 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. ADP currently has a PEG ratio of 2.18.

Another notable valuation metric for SYKE is its P/B ratio of 1.51. 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, ADP has a P/B of 9.77.

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

SYKE stands above ADP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SYKE is the superior value 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
 
Sykes Enterprises, Incorporated (SYKE) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
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Zacks Investment Research