Investors with an interest in Computers - IT Services stocks have likely encountered both TD SYNNEX (SNX) and Dynatrace (DT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
TD SYNNEX and Dynatrace are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that SNX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
SNX currently has a forward P/E ratio of 17.00, while DT has a forward P/E of 20.79. We also note that SNX has a PEG ratio of 1.11. 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. DT currently has a PEG ratio of 1.49.
Another notable valuation metric for SNX is its P/B ratio of 2.59. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DT has a P/B of 4.62.
These are just a few of the metrics contributing to SNX's Value grade of A and DT's Value grade of D.
SNX sticks out from DT 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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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.
