Yahoo Finance BBSI vs. PAYX: Which Stock Is the Better Value Option?
Investors with an interest in Outsourcing stocks have likely encountered both Barrett Business Services (BBSI) and Paychex (PAYX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Barrett Business Services has a Zacks Rank of #2 (Buy), while Paychex has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BBSI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
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.
BBSI currently has a forward P/E ratio of 16.55, while PAYX has a forward P/E of 24.67. We also note that BBSI has a PEG ratio of 1.18. 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. PAYX currently has a PEG ratio of 3.40.
Another notable valuation metric for BBSI is its P/B ratio of 4.54. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, PAYX has a P/B of 11.78.
These metrics, and several others, help BBSI earn a Value grade of A, while PAYX has been given a Value grade of D.
BBSI stands above PAYX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBSI is the superior value option right now.
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Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
Paychex, Inc. (PAYX) : Free Stock Analysis Report
