CDW vs. NOW: Which Stock Is the Better Value Option?
Investors interested in Computers - IT Services stocks are likely familiar with CDW (CDW) and ServiceNow (NOW). 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.
CDW 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 CDW has an improving earnings outlook. 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.
CDW currently has a forward P/E ratio of 20.19, while NOW has a forward P/E of 81.26. We also note that CDW has a PEG ratio of 1.54. 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. NOW currently has a PEG ratio of 2.90.
Another notable valuation metric for CDW is its P/B ratio of 18.30. 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 39.18.
These metrics, and several others, help CDW earn a Value grade of B, while NOW has been given a Value grade of F.
CDW sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that CDW is the better option right now.
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