CDW vs. NOW: Which Stock Is the Better Value Option?
Investors interested in Computers - IT Services stocks are likely familiar with CDW (CDW) and ServiceNow (NOW). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, CDW has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CDW likely has seen a stronger improvement to its earnings outlook than NOW has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 119.41. 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 4.34.
Another notable valuation metric for CDW is its P/B ratio of 15.13. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 39.68.
These metrics, and several others, help CDW earn a Value grade of B, while NOW has been given 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.
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
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
