Investors interested in stocks from the Medical - Products sector have probably already heard of Phibro Animal Health (PAHC) and Stryker (SYK). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Phibro Animal Health has a Zacks Rank of #2 (Buy), while Stryker has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PAHC has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
PAHC currently has a forward P/E ratio of 10.36, while SYK has a forward P/E of 20.54. We also note that PAHC has a PEG ratio of 0.48. 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. SYK currently has a PEG ratio of 1.97.
Another notable valuation metric for PAHC is its P/B ratio of 3.57. 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 5.14.
These are just a few of the metrics contributing to PAHC's Value grade of A and SYK's Value grade of D.
PAHC 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 PAHC is likely the superior value option right now.
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Phibro Animal Health Corporation (PAHC): Free Stock Analysis Report
Stryker Corporation (SYK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).