Investors interested in stocks from the Computers - IT Services sector have probably already heard of DXC Technology (DXC) and Acxiom (ACXM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
DXC Technology has a Zacks Rank of #2 (Buy), while Acxiom has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that DXC likely has seen a stronger improvement to its earnings outlook than ACXM has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
DXC currently has a forward P/E ratio of 11.14, while ACXM has a forward P/E of 48.64. We also note that DXC has a PEG ratio of 1.54. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ACXM currently has a PEG ratio of 4.86.
Another notable valuation metric for DXC is its P/B ratio of 2.18. 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, ACXM has a P/B of 4.86.
Based on these metrics and many more, DXC holds a Value grade of A, while ACXM has a Value grade of F.
DXC 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 DXC is likely the superior value option right now.
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