Which stock should value investors buy now?


Investors interested in computer IT services stocks are likely familiar with CDW (CDW) and ServiceNow (NOW). But which of these two stocks offers value investors better value right now? We need to take a closer look.

Everyone has their own methods of finding great opportunities, but our model involves pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific characteristics.

CDW and ServiceNow currently have Zacks ranks at #2 (Buy) and #3 (Hold), respectively. Investors should feel comfortable knowing that CDW has likely improved its earnings outlook more than NOW has of late. But that’s only part of the picture for value investors.

Value investors are also interested in a number of proven valuation metrics that show when a company is undervalued at its current share price level.

The Style Scores system’s Value category identifies undervalued companies based on a number of key metrics. These include long-favored price-to-earnings multiples, price-to-earnings ratios, earnings yield, cash flow per share, and a host of other fundamentals that help us determine a company’s fair value.

CDW currently has a forward P/E of 23.19, while NOW has a forward P/E of 91.95. We also note that CDW has a PEG ratio of 1.77. This popular metric is similar to the well-known P/E ratio, except that the PEG ratio also takes into account the company’s expected earnings growth rate. NOW currently has a PEG ratio of 3.30.

Another notable valuation metric for CDW is its P/B ratio of 20.61. P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 32.86.

These are just some of the metrics that contribute to CDW’s B score and NOW’s D score.

CDW stands above NOW on its solid earnings outlook, and based on these valuation numbers, we also think CDW is the best value option right now.

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CDW Corporation (CDW): Free Stock Research Report

ServiceNow, Inc. (NOW): Free Stock Research Report

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