Investors looking for stocks in the Computers - IT Services sector might want to consider either PERSPECTA INC (PRSP - Free Report) or ServiceNow (NOW - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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.
PERSPECTA INC has a Zacks Rank of #1 (Strong Buy), while ServiceNow has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PRSP has an improving earnings 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PRSP currently has a forward P/E ratio of 12.84, while NOW has a forward P/E of 76.60. We also note that PRSP has a PEG ratio of 1.61. 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. NOW currently has a PEG ratio of 2.32.
Another notable valuation metric for PRSP is its P/B ratio of 1.84. 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 36.13.
These metrics, and several others, help PRSP earn a Value grade of B, while NOW has been given a Value grade of F.
PRSP sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that PRSP is the better option right now.