Investors with an interest in Computers - IT Services stocks have likely encountered both Leidos (LDOS) and ServiceNow (NOW). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Leidos and ServiceNow are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that LDOS'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 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
LDOS currently has a forward P/E ratio of 16.09, while NOW has a forward P/E of 36.88. We also note that LDOS has a PEG ratio of 1.38. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NOW currently has a PEG ratio of 1.50.
Another notable valuation metric for LDOS is its P/B ratio of 5.1. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 13.69.
These are just a few of the metrics contributing to LDOS's Value grade of B and NOW's Value grade of F.
LDOS has seen stronger estimate revision activity and sports more attractive valuation metrics than NOW, so it seems like value investors will conclude that LDOS is the superior option right now.
#1 Semiconductor Stock to Buy (Not NVDA)
The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.
One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.
See This Stock Now for Free >>Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
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.
