CDW vs. NOW: Which Stock Should Value Investors Buy Now?
Investors with an interest in Computers - IT Services stocks have likely encountered both CDW (CDW) and ServiceNow (NOW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
CDW and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CDW is likely seeing its earnings outlook improve to a greater extent. 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 25.10, while NOW has a forward P/E of 101.09. We also note that CDW has a PEG ratio of 1.92. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NOW currently has a PEG ratio of 3.59.
Another notable valuation metric for CDW is its P/B ratio of 22.34. 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 35.37.
Based on these metrics and many more, CDW holds a Value grade of B, while NOW has a Value grade of D.
CDW has seen stronger estimate revision activity and sports more attractive valuation metrics than NOW, so it seems like value investors will conclude that CDW is the superior option right now.
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