Investors interested in stocks from the Medical - Dental Supplies sector have probably already heard of AmerisourceBergen (ABC) and West Pharmaceutical Services (WST). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both AmerisourceBergen and West Pharmaceutical Services are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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 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.
ABC currently has a forward P/E ratio of 13.33, while WST has a forward P/E of 64.56. We also note that ABC has a PEG ratio of 1.87. 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. WST currently has a PEG ratio of 7.01.
Another notable valuation metric for ABC is its P/B ratio of 5.45. 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, WST has a P/B of 11.52.
Based on these metrics and many more, ABC holds a Value grade of A, while WST has a Value grade of D.
Both ABC and WST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ABC is the superior value option right now.
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AmerisourceBergen Corporation (ABC): Free Stock Analysis Report
West Pharmaceutical Services, Inc. (WST): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.