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CDW vs. NOW: Which Stock Is the Better Value Option?

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Zacks Equity Research
·2 min read
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Investors interested in Computers - IT Services stocks are likely familiar with CDW (CDW) and ServiceNow (NOW). 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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

CDW and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CDW has an improving earnings outlook. But this is only part of the picture for value investors.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

CDW currently has a forward P/E ratio of 21, while NOW has a forward P/E of 115.89. We also note that CDW has a PEG ratio of 1.60. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NOW currently has a PEG ratio of 4.09.

Another notable valuation metric for CDW is its P/B ratio of 15.23. 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 38.53.

Based on these metrics and many more, CDW holds a Value grade of B, while NOW has a Value grade of D.

CDW is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CDW is likely the superior value option right now.


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CDW Corporation (CDW) : Free Stock Analysis Report
 
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
 
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