Investors interested in stocks from the Computers - IT Services sector have probably already heard of CDW (CDW - 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, CDW is sporting a Zacks Rank of #1 (Strong Buy), while ServiceNow has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CDW 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.
CDW currently has a forward P/E ratio of 19.72, while NOW has a forward P/E of 106.53. We also note that CDW has a PEG ratio of 1.51. 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. NOW currently has a PEG ratio of 3.68.
Another notable valuation metric for CDW is its P/B ratio of 15.39. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 36.67.
Based on these metrics and many more, CDW holds a Value grade of B, while NOW has a Value grade of D.
CDW sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that CDW is the better option right now.