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

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·2 min read
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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.

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 just one factor that value investors are interested in.

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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

CDW currently has a forward P/E ratio of 23.98, while NOW has a forward P/E of 116.66. We also note that CDW has a PEG ratio of 1.83. 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 4.12.

Another notable valuation metric for CDW is its P/B ratio of 30.05. The 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. By comparison, NOW has a P/B of 38.98.

These are just a few of the metrics contributing to CDW's Value grade of B and NOW's Value grade of D.

CDW stands above NOW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CDW is 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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Zacks Investment Research