Investors looking for stocks in the Medical - Instruments sector might want to consider either Fresenius (FMS) or RxSight, Inc. (RXST). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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.
Currently, Fresenius has a Zacks Rank of #2 (Buy), while RxSight, Inc. has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FMS 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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
FMS currently has a forward P/E ratio of 12.19, while RXST has a forward P/E of 2,025.00. We also note that FMS has a PEG ratio of 1.09. 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. RXST currently has a PEG ratio of 53.43.
Another notable valuation metric for FMS is its P/B ratio of 0.97. 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, RXST has a P/B of 1.96.
Based on these metrics and many more, FMS holds a Value grade of B, while RXST has a Value grade of F.
FMS stands above RXST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FMS is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
