Investors looking for stocks in the Medical - Drugs sector might want to consider either Grifols (GRFS) or Zoetis (ZTS). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Grifols has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold) right now. This means that GRFS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
GRFS currently has a forward P/E ratio of 9.23, while ZTS has a forward P/E of 22.99. We also note that GRFS has a PEG ratio of 0.32. 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. ZTS currently has a PEG ratio of 2.35.
Another notable valuation metric for GRFS is its P/B ratio of 0.75. 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, ZTS has a P/B of 13.02.
These are just a few of the metrics contributing to GRFS's Value grade of A and ZTS's Value grade of C.
GRFS stands above ZTS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GRFS 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.
