Investors interested in Medical Services stocks are likely familiar with Viatris (VTRS) and Danaher (DHR). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Viatris and Danaher are sporting a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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.
VTRS currently has a forward P/E ratio of 6.70, while DHR has a forward P/E of 22.60. We also note that VTRS has a PEG ratio of 1.46. 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. DHR currently has a PEG ratio of 2.43.
Another notable valuation metric for VTRS is its P/B ratio of 1.32. 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, DHR has a P/B of 2.55.
Based on these metrics and many more, VTRS holds a Value grade of A, while DHR has a Value grade of D.
Both VTRS and DHR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that VTRS is the superior value option right now.
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Viatris Inc. (VTRS): Free Stock Analysis Report
Danaher Corporation (DHR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).