Investors interested in stocks from the Medical Services sector have probably already heard of Elevance Health (ELV) and GoodRx Holdings, Inc. (GDRX). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Elevance Health has a Zacks Rank of #2 (Buy), while GoodRx Holdings, Inc. 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 ELV is likely seeing its earnings outlook improve to a greater extent. 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.
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.
ELV currently has a forward P/E ratio of 13.21, while GDRX has a forward P/E of 20.74. We also note that ELV has a PEG ratio of 1.08. 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. GDRX currently has a PEG ratio of 1.77.
Another notable valuation metric for ELV is its P/B ratio of 2.70. 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, GDRX has a P/B of 4.
These are just a few of the metrics contributing to ELV's Value grade of A and GDRX's Value grade of D.
ELV has seen stronger estimate revision activity and sports more attractive valuation metrics than GDRX, so it seems like value investors will conclude that ELV is the superior option right now.
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