Investors interested in stocks from the Computers - IT Services sector have probably already heard of TD SYNNEX (SNX) and Dynatrace (DT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Right now, TD SYNNEX is sporting a Zacks Rank of #2 (Buy), while Dynatrace has a Zacks Rank of #3 (Hold). This means that SNX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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 11.76, while DT has a forward P/E of 27.10. We also note that SNX has a PEG ratio of 1.10. 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 1.91.
Another notable valuation metric for SNX is its P/B ratio of 1.46. 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, DT has a P/B of 4.79.
Based on these metrics and many more, SNX holds a Value grade of A, while DT has a 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.
