Investors interested in Computers - IT Services stocks are likely familiar with Leidos (LDOS) and Dynatrace (DT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Leidos has a Zacks Rank of #2 (Buy), while Dynatrace has a Zacks Rank of #3 (Hold) right now. This means that LDOS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 17.43, while DT has a forward P/E of 30.93. We also note that LDOS has a PEG ratio of 1.86. 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. DT currently has a PEG ratio of 2.41.
Another notable valuation metric for LDOS is its P/B ratio of 5.33. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, DT has a P/B of 5.54.
Based on these metrics and many more, LDOS holds a Value grade of B, while DT has a Value grade of D.
LDOS sticks out from DT in both our Zacks Rank and Style Scores models, so value investors will likely feel that LDOS is the better option right now.
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Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report Dynatrace, Inc. (DT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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