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WIT vs. QTWO: Which Stock Is the Better Value Option?

Zacks Equity Research
Alkermes (ALKS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors with an interest in Business - Software Services stocks have likely encountered both Wipro Limited (WIT) and Q2 Holdings (QTWO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Wipro Limited and Q2 Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that WIT'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 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

WIT currently has a forward P/E ratio of 18.94, while QTWO has a forward P/E of 353.92. We also note that WIT has a PEG ratio of 1.96. 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. QTWO currently has a PEG ratio of 17.70.

Another notable valuation metric for WIT is its P/B ratio of 3.09. 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, QTWO has a P/B of 14.97.

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

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


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