Investors with an interest in Computers - IT Services stocks have likely encountered both Fujitsu Ltd. (FJTSY) and ServiceNow (NOW). But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Fujitsu Ltd. has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FJTSY has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FJTSY currently has a forward P/E ratio of 18.75, while NOW has a forward P/E of 25.92. We also note that FJTSY has a PEG ratio of 0.99. 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 1.02.
Another notable valuation metric for FJTSY is its P/B ratio of 2.76. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NOW has a P/B of 8.72.
These metrics, and several others, help FJTSY earn a Value grade of B, while NOW has been given a Value grade of D.
FJTSY 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 FJTSY is likely the superior value option right now.
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See Stocks Now >>Fujitsu Ltd. (FJTSY) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
