Investors interested in stocks from the Computer - Integrated Systems sector have probably already heard of Hewlett Packard Enterprise (HPE) and Advanced Micro Devices (AMD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Hewlett Packard Enterprise and Advanced Micro Devices are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HPE has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
HPE currently has a forward P/E ratio of 14.54, while AMD has a forward P/E of 75.94. We also note that HPE has a PEG ratio of 0.45. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AMD currently has a PEG ratio of 1.38.
Another notable valuation metric for HPE is its P/B ratio of 2.59. 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, AMD has a P/B of 13.86.
Based on these metrics and many more, HPE holds a Value grade of B, while AMD has a Value grade of F.
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.
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Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).