Investors interested in Medical - Dental Supplies stocks are likely familiar with Align Technology (ALGN) and West Pharmaceutical Services (WST). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Align Technology and West Pharmaceutical Services are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
ALGN currently has a forward P/E ratio of 14.87, while WST has a forward P/E of 38.33. We also note that ALGN has a PEG ratio of 1.44. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. WST currently has a PEG ratio of 2.76.
Another notable valuation metric for ALGN is its P/B ratio of 2.91. 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, WST has a P/B of 7.7.
These are just a few of the metrics contributing to ALGN's Value grade of B and WST's Value grade of D.
Both ALGN and WST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ALGN is the superior value option right now.
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Align Technology, Inc. (ALGN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).