Investors interested in stocks from the Technology Services sector have probably already heard of Telus International (TIXT) and Evoqua Water (AQUA). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Telus International has a Zacks Rank of #2 (Buy), while Evoqua Water has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TIXT likely has seen a stronger improvement to its earnings outlook than AQUA has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TIXT currently has a forward P/E ratio of 26.06, while AQUA has a forward P/E of 46.83. We also note that TIXT has a PEG ratio of 1.54. 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. AQUA currently has a PEG ratio of 3.12.
Another notable valuation metric for TIXT is its P/B ratio of 4.90. 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, AQUA has a P/B of 7.40.
Based on these metrics and many more, TIXT holds a Value grade of B, while AQUA has a Value grade of C.
TIXT stands above AQUA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TIXT is the superior value option right now.
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TELUS International CDA Inc. (TIXT) : Free Stock Analysis Report
Evoqua Water Technologies (AQUA) : Free Stock Analysis Report
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