Investors interested in Medical Services stocks are likely familiar with Solventum (SOLV) 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Solventum and HealthEquity are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that SOLV likely has seen a stronger improvement to its earnings outlook than HQY has recently. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SOLV currently has a forward P/E ratio of 11.31, while HQY has a forward P/E of 17.91. We also note that SOLV has a PEG ratio of 1.15. 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. HQY currently has a PEG ratio of 1.25.
Another notable valuation metric for SOLV is its P/B ratio of 2.6. 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 3.34.
Based on these metrics and many more, SOLV holds a Value grade of B, while HQY has a Value grade of C.
SOLV stands above HQY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SOLV is the superior value option right now.
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Solventum Corporation (SOLV): Free Stock Analysis Report
HealthEquity, Inc. (HQY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).