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International Business Machines Corporation (IBM) - free report >>
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HPE or IBM: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Computer - Integrated Systems sector might want to consider either Hewlett Packard Enterprise (HPE - Free Report) or IBM (IBM - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Hewlett Packard Enterprise and IBM are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that HPE'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HPE currently has a forward P/E ratio of 7.88, while IBM has a forward P/E of 15.41. We also note that HPE has a PEG ratio of 1.67. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. IBM currently has a PEG ratio of 3.69.
Another notable valuation metric for HPE is its P/B ratio of 1.05. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, IBM has a P/B of 5.95.
These are just a few of the metrics contributing to HPE's Value grade of A and IBM's Value grade of C.
HPE is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HPE is likely the superior value option right now.