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SNX or GWRE: Which Is the Better Value Stock Right Now?

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Investors interested in stocks from the Business - Software Services sector have probably already heard of Synnex (SNX - Free Report) and Guidewire Software (GWRE - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Synnex is sporting a Zacks Rank of #1 (Strong Buy), while Guidewire Software has a Zacks Rank of #3 (Hold). This means that SNX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

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.

SNX currently has a forward P/E ratio of 8.95, while GWRE has a forward P/E of 91.65. We also note that SNX has a PEG ratio of 0.86. 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. GWRE currently has a PEG ratio of 6.54.

Another notable valuation metric for SNX is its P/B ratio of 1.69. 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, GWRE has a P/B of 5.71.

These are just a few of the metrics contributing to SNX's Value grade of A and GWRE's Value grade of F.

SNX has seen stronger estimate revision activity and sports more attractive valuation metrics than GWRE, so it seems like value investors will conclude that SNX is the superior option right now.


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