Investors with an interest in Medical - Instruments stocks have likely encountered both Thermo Fisher Scientific (TMO) and Idexx Laboratories (IDXX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, Thermo Fisher Scientific is sporting a Zacks Rank of #2 (Buy), while Idexx Laboratories has a Zacks Rank of #4 (Sell). This means that TMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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 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.
TMO currently has a forward P/E ratio of 24.80, while IDXX has a forward P/E of 43.81. We also note that TMO has a PEG ratio of 2.50. 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. IDXX currently has a PEG ratio of 3.94.
Another notable valuation metric for TMO is its P/B ratio of 4.50. 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, IDXX has a P/B of 25.45.
Based on these metrics and many more, TMO holds a Value grade of B, while IDXX has a Value grade of D.
TMO stands above IDXX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TMO is the superior value 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.
