Investors interested in Medical Services stocks are likely familiar with Labcorp Holdings (LH) and Danaher (DHR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Labcorp Holdings has a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that LH likely has seen a stronger improvement to its earnings outlook than DHR has recently. But this is only part of the picture 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.
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.
LH currently has a forward P/E ratio of 15.24, while DHR has a forward P/E of 23.29. We also note that LH has a PEG ratio of 1.84. 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. DHR currently has a PEG ratio of 2.66.
Another notable valuation metric for LH is its P/B ratio of 2.59. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DHR has a P/B of 2.63.
These metrics, and several others, help LH earn a Value grade of B, while DHR has been given a Value grade of D.
LH sticks out from DHR 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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Danaher Corporation (DHR) : 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.
