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CDW or NOW: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors looking for stocks in the Computers - IT Services sector might want to consider either CDW (CDW) or ServiceNow (NOW). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, both CDW and ServiceNow are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 20.86, while NOW has a forward P/E of 73.27. We also note that CDW has a PEG ratio of 1.59. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NOW currently has a PEG ratio of 2.62.

Another notable valuation metric for CDW is its P/B ratio of 20.99. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 41.04.

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.


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