Investors interested in stocks from the Business - Software Services sector have probably already heard of Synnex (SNX) and Q2 Holdings (QTWO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Synnex has a Zacks Rank of #2 (Buy), while Q2 Holdings has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SNX likely has seen a stronger improvement to its earnings outlook than QTWO has recently. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
SNX currently has a forward P/E ratio of 8.76, while QTWO has a forward P/E of 421.61. We also note that SNX has a PEG ratio of 0.73. 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. QTWO currently has a PEG ratio of 21.08.
Another notable valuation metric for SNX is its P/B ratio of 1.52. 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, QTWO has a P/B of 18.16.
Based on these metrics and many more, SNX holds a Value grade of A, while QTWO has a Value grade of F.
SNX sticks out from QTWO in both our Zacks Rank and Style Scores models, so value investors will likely feel that SNX is the better option right now.
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