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HPE or IBM: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Computer - Integrated Systems sector might want to consider either Hewlett Packard Enterprise (HPE - Free Report) or IBM (IBM - 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, Hewlett Packard Enterprise has a Zacks Rank of #1 (Strong Buy), while IBM has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that HPE likely has seen a stronger improvement to its earnings outlook than IBM has recently. But this is just one piece of the puzzle 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.

HPE currently has a forward P/E ratio of 7.80, while IBM has a forward P/E of 15.80. We also note that HPE has a PEG ratio of 2.07. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. IBM currently has a PEG ratio of 4.07.

Another notable valuation metric for HPE is its P/B ratio of 0.99. 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, IBM has a P/B of 5.84.

Based on these metrics and many more, HPE holds a Value grade of B, while IBM has a Value grade of C.

HPE 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 HPE is likely the superior value option right now.

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