Investors interested in stocks from the Computers - IT Services sector have probably already heard of CDW (CDW - Free Report) and 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both CDW and ServiceNow have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
CDW currently has a forward P/E ratio of 22.69, while NOW has a forward P/E of 74.70. We also note that CDW has a PEG ratio of 1.73. 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. NOW currently has a PEG ratio of 2.67.
Another notable valuation metric for CDW is its P/B ratio of 20.87. 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, NOW has a P/B of 31.72.
These are just a few of the metrics contributing to CDW's Value grade of B and NOW's Value grade of F.
Both CDW and NOW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CDW is the superior value option right now.