Investors looking for stocks in the Computers - IT Services sector might want to consider either Leidos (LDOS) or Dynatrace (DT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Leidos and Dynatrace are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
LDOS currently has a forward P/E ratio of 13.53, while DT has a forward P/E of 34.37. We also note that LDOS has a PEG ratio of 1.83. 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 4.32. 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 6.19.
These are just a few of the metrics contributing to LDOS's Value grade of A and DT's Value grade of F.
Both LDOS and DT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LDOS is the superior value 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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