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CDW or NOW: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Computers - IT Services sector might want to consider either CDW (CDW - Free Report) or 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.

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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

CDW has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold) right now. This means that CDW'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

CDW currently has a forward P/E ratio of 20.89, while NOW has a forward P/E of 115.19. We also note that CDW has a PEG ratio of 1.59. 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 4.07.

Another notable valuation metric for CDW is its P/B ratio of 15.15. 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 38.10.

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.


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