Investors interested in stocks from the Medical - Products sector have probably already heard of Phibro Animal Health (PAHC) and Stryker (SYK). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Phibro Animal Health and Stryker are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PAHC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
PAHC currently has a forward P/E ratio of 10.24, while SYK has a forward P/E of 22.04. We also note that PAHC has a PEG ratio of 0.48. 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. SYK currently has a PEG ratio of 2.12.
Another notable valuation metric for PAHC is its P/B ratio of 3.82. 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, SYK has a P/B of 5.51.
These are just a few of the metrics contributing to PAHC's Value grade of A and SYK's Value grade of C.
PAHC stands above SYK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PAHC is the superior value option right now.
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Free: See Our Top Stock And 4 Runners UpPhibro Animal Health Corporation (PAHC) : Free Stock Analysis Report
Stryker Corporation (SYK) : 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.
