Investors interested in stocks from the Medical Services sector have probably already heard of Labcorp Holdings (LH) and Danaher (DHR). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Labcorp Holdings has a Zacks Rank of #2 (Buy), while Danaher has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LH is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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 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 17.54, while DHR has a forward P/E of 26.90. We also note that LH has a PEG ratio of 1.83. 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. DHR currently has a PEG ratio of 2.98.
Another notable valuation metric for LH is its P/B ratio of 2.82. 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, DHR has a P/B of 2.86.
Based on these metrics and many more, LH holds a Value grade of B, while DHR has a Value grade of D.
LH has seen stronger estimate revision activity and sports more attractive valuation metrics than DHR, so it seems like value investors will conclude that LH is the superior option right now.
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See This Stock Now for Free >>Labcorp Holdings Inc. (LH) : Free Stock Analysis Report
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.
