Investors interested in stocks from the Business - Software Services sector have probably already heard of Cognizant (CTSH) and Wipro Limited (WIT). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Currently, Cognizant has a Zacks Rank of #2 (Buy), while Wipro Limited has a Zacks Rank of #3 (Hold). This means that CTSH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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 17.06, while WIT has a forward P/E of 27.48. We also note that CTSH has a PEG ratio of 2.21. 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. WIT currently has a PEG ratio of 4.97.

Another notable valuation metric for CTSH is its P/B ratio of 2.73. 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, WIT has a P/B of 3.96.

Based on these metrics and many more, CTSH holds a Value grade of B, while WIT has a Value grade of C.

CTSH stands above WIT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CTSH is the superior value option right now.

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

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