Investors interested in stocks from the Computers - IT Services sector have probably already heard of Dell Technologies (DELL - Free Report) and ServiceNow (NOW - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Dell Technologies and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that DELL likely has seen a stronger improvement to its earnings outlook than NOW has recently. 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 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.
DELL currently has a forward P/E ratio of 9.83, while NOW has a forward P/E of 102.49. We also note that DELL has a PEG ratio of 0.82. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NOW currently has a PEG ratio of 3.63.
Another notable valuation metric for DELL is its P/B ratio of 13.56. 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, NOW has a P/B of 36.61.
Based on these metrics and many more, DELL holds a Value grade of B, while NOW has a Value grade of F.
DELL sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that DELL is the better option right now.