Investors interested in stocks from the Computers - IT Services sector have probably already heard of Leidos (LDOS) and Dynatrace (DT). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Leidos is sporting a Zacks Rank of #1 (Strong Buy), while Dynatrace 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 LDOS 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.
LDOS currently has a forward P/E ratio of 15.02, while DT has a forward P/E of 34.27. We also note that LDOS has a PEG ratio of 1.95. 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. DT currently has a PEG ratio of 2.72.
Another notable valuation metric for LDOS is its P/B ratio of 4.88. 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, DT has a P/B of 6.18.
These metrics, and several others, help LDOS earn a Value grade of B, while DT has been given a Value grade of F.
LDOS has seen stronger estimate revision activity and sports more attractive valuation metrics than DT, so it seems like value investors will conclude that LDOS is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report Dynatrace, Inc. (DT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
