Investors interested in stocks from the Computers - IT Services sector have probably already heard of Dell Technologies (NYSE:DELL) and Epam (EPAM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Currently, Dell Technologies has a Zacks Rank of #2 (Buy), while Epam has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DELL has an improving earnings outlook. But this is only part of the picture for value investors.
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.
DELL currently has a forward P/E ratio of 9.89, while EPAM has a forward P/E of 53.56. We also note that DELL has a PEG ratio of 0.82. 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. EPAM currently has a PEG ratio of 2.99.
Another notable valuation metric for DELL is its P/B ratio of 9.33. 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, EPAM has a P/B of 10.03.
Based on these metrics and many more, DELL holds a Value grade of A, while EPAM has a Value grade of C.
DELL stands above EPAM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DELL is the superior value 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
Dell Technologies Inc. (DELL): Free Stock Analysis Report
EPAM Systems, Inc. (EPAM): Free Stock Analysis Report
To read this article on Zacks.com click here.