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 presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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 and Zoetis are both sporting a Zacks Rank of # 2 (Buy) right now. 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. But this is only part of the picture for value investors.
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.
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.
GRFS currently has a forward P/E ratio of 6.83, while ZTS has a forward P/E of 32.85. We also note that GRFS has a PEG ratio of 0.21. 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. ZTS currently has a PEG ratio of 2.87.
Another notable valuation metric for GRFS is its P/B ratio of 0.59. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 17.80.
These metrics, and several others, help GRFS earn a Value grade of A, while ZTS has been given a Value grade of C.
Both GRFS and ZTS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GRFS is the superior value option right now.
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Zoetis Inc. (ZTS) : 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.
