NVST vs. ABT: Which Stock Is the Better Value Option?
Investors with an interest in Medical - Products stocks have likely encountered both Envista (NVST) and Abbott (ABT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Envista and Abbott are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
NVST currently has a forward P/E ratio of 15.72, while ABT has a forward P/E of 18.30. We also note that NVST has a PEG ratio of 1.15. 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. ABT currently has a PEG ratio of 1.87.
Another notable valuation metric for NVST is its P/B ratio of 1.27. 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, ABT has a P/B of 3.38.
These metrics, and several others, help NVST earn a Value grade of A, while ABT has been given a Value grade of C.
Both NVST and ABT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NVST is the superior value option right now.
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Abbott Laboratories (ABT) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
