Investors looking for stocks in the Computers – IT Services sector might want to consider either ASGN Inc (ASGN) or ServiceNow (NOW). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, ASGN Inc is sporting a Zacks Rank of #2 (Buy), while ServiceNow has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ASGN likely has seen a stronger improvement to its earnings outlook than NOW has recently. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company’s fair value.
ASGN currently has a forward P/E ratio of 12.46, while NOW has a forward P/E of 52.17. We also note that ASGN has a PEG ratio of 0.88. 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. NOW currently has a PEG ratio of 1.85.
Another notable valuation metric for ASGN is its P/B ratio of 2.21. 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 17.05.
These metrics, and several others, help ASGN earn a Value grade of A, while NOW has been given a Value grade of D.
ASGN stands above NOW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ASGN is the superior value option right now.
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