DVMT Vs. NOW: Which Stock Is The Better Value Option?

 | Nov 20, 2018 09:30PM ET

Investors with an interest in Computers - IT Services stocks have likely encountered both Dell Technologies (DVMT) and ServiceNow (NOW). 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 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.

Dell Technologies and ServiceNow are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that DVMT likely has seen a stronger improvement to its earnings outlook than NOW has recently. But this is only part of the picture 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.

DVMT currently has a forward P/E ratio of 16.83, while NOW has a forward P/E of 66.55. We also note that DVMT has a PEG ratio of 1.85. 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 2.02.

Another notable valuation metric for DVMT is its P/B ratio of 5.18. 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 27.64.

Based on these metrics and many more, DVMT holds a Value grade of B, while NOW has a Value grade of F.

DVMT sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that DVMT is the better option right now.

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