Investors looking for stocks in the Medical - Products sector might want to consider either Prestige Consumer Healthcare (PBH) or Abbott (ABT). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Right now, Prestige Consumer Healthcare is sporting a Zacks Rank of #2 (Buy), while Abbott has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that PBH likely has seen a stronger improvement to its earnings outlook than ABT has recently. But this is only part of the picture 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 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.
PBH currently has a forward P/E ratio of 13.73, while ABT has a forward P/E of 22.32. We also note that PBH has a PEG ratio of 1.96. 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. ABT currently has a PEG ratio of 2.09.
Another notable valuation metric for PBH is its P/B ratio of 1.68. 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, ABT has a P/B of 4.29.
These are just a few of the metrics contributing to PBH's Value grade of B and ABT's Value grade of C.
PBH stands above ABT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PBH is the superior value option right now.
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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.
