Investors interested in stocks from the Computers - IT Services sector have probably already heard of Epam (EPAM) and Dynatrace (DT). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.
Epam and Dynatrace are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
EPAM currently has a forward P/E ratio of 15.73, while DT has a forward P/E of 29.38. We also note that EPAM has a PEG ratio of 1.99. 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. DT currently has a PEG ratio of 2.07.
Another notable valuation metric for EPAM is its P/B ratio of 2.62. 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 5.12.
These metrics, and several others, help EPAM earn a Value grade of B, while DT has been given a Value grade of F.
Both EPAM and DT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EPAM is the superior value option right now.
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EPAM Systems, Inc. (EPAM): Free Stock Analysis Report Dynatrace, Inc. (DT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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