Investors with an interest in Medical Services stocks have likely encountered both Labcorp Holdings (LH) and Charles River Laboratories (CRL). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Labcorp Holdings and Charles River Laboratories are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LH has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
LH currently has a forward P/E ratio of 15.55, while CRL has a forward P/E of 20.53. We also note that LH has a PEG ratio of 1.96. 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. CRL currently has a PEG ratio of 2.59.
Another notable valuation metric for LH is its P/B ratio of 2.64. 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, CRL has a P/B of 3.71.
Based on these metrics and many more, LH holds a Value grade of B, while CRL has a Value grade of C.
LH sticks out from CRL in both our Zacks Rank and Style Scores models, so value investors will likely feel that LH is the better option right now.
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Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report
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.
