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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 with an interest in Computer - Integrated Systems stocks have likely encountered both Hewlett Packard Enterprise (HPE - Free Report) and IBM (IBM - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Currently, Hewlett Packard Enterprise has a Zacks Rank of #2 (Buy), while IBM has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HPE is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
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.
HPE currently has a forward P/E ratio of 9.53, while IBM has a forward P/E of 20.59. We also note that HPE has a PEG ratio of 3.02. 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. IBM currently has a PEG ratio of 4.68.
Another notable valuation metric for HPE is its P/B ratio of 1.18. 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, IBM has a P/B of 7.85.
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.