Investors looking for stocks in the Computers - IT Services sector might want to consider either DXC Technology Company. (DXC) or 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.
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 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.
DXC Technology Company. and Dynatrace are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DXC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
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.
DXC currently has a forward P/E ratio of 7.38, while DT has a forward P/E of 41.66. We also note that DXC has a PEG ratio of 1.86. 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 4.14.
Another notable valuation metric for DXC is its P/B ratio of 1.27. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DT has a P/B of 7.43.
Based on these metrics and many more, DXC holds a Value grade of A, while DT has a Value grade of F.
DXC sticks out from DT in both our Zacks Rank and Style Scores models, so value investors will likely feel that DXC is the better option right now.
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