Investors interested in Medical - Products stocks are likely familiar with Smith & Nephew (SNN) and Stryker (SYK). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Smith & Nephew is sporting a Zacks Rank of #2 (Buy), while Stryker has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SNN has an improving earnings outlook. However, value investors will care about much more than just this.
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 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.
SNN currently has a forward P/E ratio of 16.03, while SYK has a forward P/E of 30.22. We also note that SNN has a PEG ratio of 0.97. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SYK currently has a PEG ratio of 2.99.
Another notable valuation metric for SNN is its P/B ratio of 2.63. 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, SYK has a P/B of 7.36.
These are just a few of the metrics contributing to SNN's Value grade of A and SYK's Value grade of D.
SNN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SNN is likely the superior value option right now.
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Download Atomic Opportunity: Nuclear Energy's Comeback free today.Smith & Nephew SNATS, Inc. (SNN) : 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.
