Investors with an interest in Computers - IT Services stocks have likely encountered both Epam (EPAM) and ServiceNow (NOW). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Epam has a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that EPAM 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 tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
EPAM currently has a forward P/E ratio of 6.84, while NOW has a forward P/E of 26.81. We also note that EPAM has a PEG ratio of 0.65. 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 1.04.
Another notable valuation metric for EPAM is its P/B ratio of 1.37. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NOW has a P/B of 9.73.
Based on these metrics and many more, EPAM holds a Value grade of A, while NOW has a Value grade of D.
EPAM sticks out from NOW in both our Zacks Rank and Style Scores models, so value investors will likely feel that EPAM is the better option right now.
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EPAM Systems, Inc. (EPAM): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).