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DXC vs. INOV: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Computers - IT Services sector have probably already heard of DXC Technology Company. (DXC - Free Report) and Inovalon Holdings (INOV - 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.

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 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.

Currently, DXC Technology Company. has a Zacks Rank of #2 (Buy), while Inovalon Holdings has a Zacks Rank of #3 (Hold). This means that DXC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

DXC currently has a forward P/E ratio of 10.85, while INOV has a forward P/E of 52.02. We also note that DXC has a PEG ratio of 0.40. 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. INOV currently has a PEG ratio of 2.

Another notable valuation metric for DXC is its P/B ratio of 1.84. 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, INOV has a P/B of 8.14.

Based on these metrics and many more, DXC holds a Value grade of A, while INOV has a Value grade of C.

DXC 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 DXC is likely the superior value option right now.


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