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

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Investors interested in Computers - IT Services stocks are likely familiar with CDW (CDW - Free Report) and ServiceNow (NOW - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

CDW and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CDW is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CDW currently has a forward P/E ratio of 22.77, while NOW has a forward P/E of 108.12. We also note that CDW has a PEG ratio of 1.74. 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. NOW currently has a PEG ratio of 3.89.

Another notable valuation metric for CDW is its P/B ratio of 17.13. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 40.70.

These are just a few of the metrics contributing to CDW's Value grade of B and NOW's Value grade of F.

CDW is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CDW is likely the superior value option right now.


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