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JAZZ vs. ZTS: Which Stock Is the Better Value Option?

Investors interested in stocks from the Medical - Drugs sector have probably already heard of Jazz Pharmaceuticals (JAZZ) and Zoetis (ZTS). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Jazz Pharmaceuticals has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold) right now. This means that JAZZ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

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.

JAZZ currently has a forward P/E ratio of 11.69, while ZTS has a forward P/E of 44.58. We also note that JAZZ has a PEG ratio of 1.32. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZTS currently has a PEG ratio of 4.61.

Another notable valuation metric for JAZZ is its P/B ratio of 2.54. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ZTS has a P/B of 25.64.

These are just a few of the metrics contributing to JAZZ's Value grade of B and ZTS's Value grade of D.

JAZZ stands above ZTS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that JAZZ is the superior value 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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