Investors with an interest in Computers - IT Services stocks have likely encountered both SAIC (SAIC) 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both SAIC and ServiceNow have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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.
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.
SAIC currently has a forward P/E ratio of 15.77, while NOW has a forward P/E of 94.37. We also note that SAIC has a PEG ratio of 2.87. 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 3.37.
Another notable valuation metric for SAIC is its P/B ratio of 3.47. 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 46.93.
Based on these metrics and many more, SAIC holds a Value grade of B, while NOW has a Value grade of F.
Both SAIC and NOW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SAIC is the superior value option right now.
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Science Applications International Corporation (SAIC) : Free Stock Analysis Report
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
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