HPE or IBM: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Computer - Integrated Systems sector have probably already heard of Hewlett Packard Enterprise (HPE) and IBM (IBM). 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Hewlett Packard Enterprise has a Zacks Rank of #2 (Buy), while IBM has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HPE has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
HPE currently has a forward P/E ratio of 10.73, while IBM has a forward P/E of 23.11. We also note that HPE has a PEG ratio of 3.40. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. IBM currently has a PEG ratio of 4.88.
Another notable valuation metric for HPE is its P/B ratio of 1.23. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, IBM has a P/B of 8.93.
These metrics, and several others, help HPE earn a Value grade of A, while IBM has been given a Value grade of C.
HPE stands above IBM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HPE is the superior value option right now.
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Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
International Business Machines Corporation (IBM) : Free Stock Analysis Report