Investors interested in stocks from the Outsourcing sector have probably already heard of Barrett Business Services (BBSI) and ExlService Holdings (EXLS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Both Barrett Business Services and ExlService Holdings have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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 19.05, while EXLS has a forward P/E of 23.61. We also note that BBSI has a PEG ratio of 1.36. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. EXLS currently has a PEG ratio of 1.45.

Another notable valuation metric for BBSI is its P/B ratio of 4.78. 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, EXLS has a P/B of 7.69.

Based on these metrics and many more, BBSI holds a Value grade of A, while EXLS has a Value grade of C.

Both BBSI and EXLS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BBSI is the superior value option right now.

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Barrett Business Services, Inc. (BBSI):Free Stock Analysis Report

ExlService Holdings, Inc. (EXLS):Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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