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CDW vs. NOW: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Computers - IT Services sector might want to consider either CDW (CDW - Free Report) or ServiceNow (NOW - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, CDW is sporting a Zacks Rank of #1 (Strong Buy), while ServiceNow has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CDW has an improving earnings 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.

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.

CDW currently has a forward P/E ratio of 19.98, while NOW has a forward P/E of 110.59. We also note that CDW has a PEG ratio of 1.53. 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. NOW currently has a PEG ratio of 3.83.

Another notable valuation metric for CDW is its P/B ratio of 15.59. 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 37.75.

These are just a few of the metrics contributing to CDW's Value grade of B and NOW's Value grade of F.

CDW stands above NOW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CDW is the superior value option right now.


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