Technology

CAH or ALGN: Which Is the Better Value Stock Right Now?

Investors interested in Medical - Dental Supplies stocks are likely familiar with Cardinal Health (CAH) and Align Technology (ALGN). 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Right now, Cardinal Health is sporting a Zacks Rank of #2 (Buy), while Align Technology has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CAH is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

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.

CAH currently has a forward P/E ratio of 9.45, while ALGN has a forward P/E of 52.92. We also note that CAH has a PEG ratio of 1.52. 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. ALGN currently has a PEG ratio of 2.45.

Another notable valuation metric for CAH is its P/B ratio of 2.37. 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, ALGN has a P/B of 17.17.

Based on these metrics and many more, CAH holds a Value grade of A, while ALGN has a Value grade of D.

CAH sticks out from ALGN in both our Zacks Rank and Style Scores models, so value investors will likely feel that CAH is the better option right now.


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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.

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