Technology

PRAH vs. HQY: Which Stock Is the Better Value Option?

Investors with an interest in Medical Services stocks have likely encountered both PRA Health Sciences (PRAH) and HealthEquity (HQY). 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.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, PRA Health Sciences has a Zacks Rank of #2 (Buy), while HealthEquity has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PRAH has an improving earnings outlook. 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.

PRAH currently has a forward P/E ratio of 22.07, while HQY has a forward P/E of 58.82. We also note that PRAH has a PEG ratio of 1.47. 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. HQY currently has a PEG ratio of 2.35.

Another notable valuation metric for PRAH is its P/B ratio of 6.86. 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, HQY has a P/B of 9.81.

Based on these metrics and many more, PRAH holds a Value grade of B, while HQY has a Value grade of F.

PRAH has seen stronger estimate revision activity and sports more attractive valuation metrics than HQY, so it seems like value investors will conclude that PRAH is the superior option right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.