Investors looking for stocks in the Computers - IT Services sector might want to consider either Amdocs (DOX) or ServiceNow (NOW). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Amdocs and ServiceNow are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
DOX currently has a forward P/E ratio of 14.19, while NOW has a forward P/E of 85.29. We also note that DOX has a PEG ratio of 1.67. 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 3.05.
Another notable valuation metric for DOX is its P/B ratio of 2.43. 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 42.38.
These metrics, and several others, help DOX earn a Value grade of A, while NOW has been given a Value grade of F.
Both DOX and NOW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DOX is the superior value option right now.
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Amdocs Limited (DOX) : Free Stock Analysis Report
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