Is CDW Corporation (CDW) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put CDW Corporation CDW stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, CDW Corporation has a trailing twelve months PE ratio of 18.9, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.7. If we focus on the stock’s long-term PE trend, the current level puts CDW Corporation’s current PE ratio somewhat above its midpoint (which is 15.8) over the past three years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 19.4. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that CDW Corporation has a forward PE ratio (price relative to this year’s earnings) of just 17.7, so it is fair to say that a slightly more value-oriented path may be ahead for CDW Corporation’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, CDW Corporation has a P/S ratio of about 0.7. This is significantly lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is marginally below the highs for this stock in particular over the past few years.
If anything, CDW Corporation is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, CDW Corporation currently has a Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes CDW a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 13.5, which is slightly better than the industry average of 14.4. Clearly, CDW is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though CDW Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of C. This gives CDW a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days and three lower, while the full year estimate has seen two upward and four downward revisions in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate did not see any earnings momentum in the past two months, while the full year estimate has inched up 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
CDW Corporation Price and Consensus
CDW Corporation Price and Consensus | CDW Corporation Quote
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
CDW Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a decent industry rank (top 29% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. In fact, over the past one year, the sector has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick. Moreover, broader factors at the industry level support the growth potential of the company as well.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CDW Corporation (CDW) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
