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HPE or ITI: Which Is the Better Value Stock Right Now?

Zacks.com logo Zacks.com 12/6/2021

Investors interested in stocks from the Computer - Integrated Systems sector have probably already heard of Hewlett Packard Enterprise (HPE) and Iteris (ITI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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, Hewlett Packard Enterprise has a Zacks Rank of #1 (Strong Buy), while Iteris has a Zacks Rank of #4 (Sell). 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 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

HPE currently has a forward P/E ratio of 7.47, while ITI has a forward P/E of 21.09. We also note that HPE has a PEG ratio of 1.29. 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. ITI currently has a PEG ratio of 1.41.

Another notable valuation metric for HPE is its P/B ratio of 0.99. 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, ITI has a P/B of 2.33.

Based on these metrics and many more, HPE holds a Value grade of A, while ITI has a Value grade of C.

HPE has seen stronger estimate revision activity and sports more attractive valuation metrics than ITI, so it seems like value investors will conclude that HPE is the superior option right now.

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