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CDW vs. NOW: Which Stock Should Value Investors Buy 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 offers value investors a better bang for their buck right now? We'll need to 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 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 #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CDW likely has seen a stronger improvement to its earnings outlook than NOW has recently. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

CDW currently has a forward P/E ratio of 23.19, while NOW has a forward P/E of 91.95. We also note that CDW has a PEG ratio of 1.77. 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 3.30.

Another notable valuation metric for CDW is its P/B ratio of 20.61. 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, NOW has a P/B of 32.86.

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

CDW stands above NOW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CDW is the superior value option right now.


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