Investors interested in Business - Software Services stocks are likely familiar with Synnex (SNX) and Guidewire Software (GWRE). 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.
Right now, Synnex is sporting a Zacks Rank of #2 (Buy), while Guidewire Software has a Zacks Rank of #3 (Hold). This means that SNX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
SNX currently has a forward P/E ratio of 9.34, while GWRE has a forward P/E of 96.69. We also note that SNX has a PEG ratio of 0.90. 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. GWRE currently has a PEG ratio of 7.40.
Another notable valuation metric for SNX is its P/B ratio of 1.67. 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, GWRE has a P/B of 5.86.
These are just a few of the metrics contributing to SNX's Value grade of A and GWRE's Value grade of F.
SNX 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 SNX is likely the superior value option right now.
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SYNNEX Corporation (SNX) : Free Stock Analysis Report
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