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SAIC vs. NOW: Which Stock Should Value Investors Buy Now?

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

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, SAIC is sporting a Zacks Rank of #1 (Strong Buy), while ServiceNow has a Zacks Rank of #3 (Hold). This means that SAIC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.

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.

SAIC currently has a forward P/E ratio of 19.34, while NOW has a forward P/E of 1,488.97. We also note that SAIC has a PEG ratio of 3.87. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NOW currently has a PEG ratio of 57.27.

Another notable valuation metric for SAIC is its P/B ratio of 11.27. 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 39.02.

These metrics, and several others, help SAIC earn a Value grade of B, while NOW has been given a Value grade of F.

SAIC 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 SAIC is likely the superior value option right now.


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