Investors with an interest in Medical - Products stocks have likely encountered both Zimmer Biomet (ZBH) and EssilorLuxottica Unsponsored ADR (ESLOY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Zimmer Biomet and EssilorLuxottica Unsponsored ADR are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that ZBH likely has seen a stronger improvement to its earnings outlook than ESLOY has recently. But this is only part of the picture for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ZBH currently has a forward P/E ratio of 12.07, while ESLOY has a forward P/E of 38.93. We also note that ZBH has a PEG ratio of 2.26. 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. ESLOY currently has a PEG ratio of 5.06.
Another notable valuation metric for ZBH is its P/B ratio of 1.55. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ESLOY has a P/B of 3.28.
These are just a few of the metrics contributing to ZBH's Value grade of A and ESLOY's Value grade of D.
ZBH sticks out from ESLOY in both our Zacks Rank and Style Scores models, so value investors will likely feel that ZBH is the better option right now.
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Download Atomic Opportunity: Nuclear Energy's Comeback free today.Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
EssilorLuxottica Unsponsored ADR (ESLOY) : 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.
