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DELL vs. NOW: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Computers - IT Services sector might want to consider either Dell Technologies (DELL) 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Dell Technologies has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DELL has an improving earnings outlook. However, value investors will care about much more than just this.

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.

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.

DELL currently has a forward P/E ratio of 7.11, while NOW has a forward P/E of 79.47. We also note that DELL has a PEG ratio of 0.59. 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 2.84.

Another notable valuation metric for DELL is its P/B ratio of 11.94. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NOW has a P/B of 38.27.

These are just a few of the metrics contributing to DELL's Value grade of A and NOW's Value grade of F.

DELL has seen stronger estimate revision activity and sports more attractive valuation metrics than NOW, so it seems like value investors will conclude that DELL is the superior option right now.


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