Investors interested in stocks from the Medical - Instruments sector have probably already heard of Integra LifeSciences (IART) and Penumbra (PEN). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Integra LifeSciences has a Zacks Rank of #2 (Buy), while Penumbra 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 IART 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.
IART currently has a forward P/E ratio of 6.61, while PEN has a forward P/E of 64.35. We also note that IART has a PEG ratio of 0.84. 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. PEN currently has a PEG ratio of 2.19.
Another notable valuation metric for IART is its P/B ratio of 1.21. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, PEN has a P/B of 8.21.
Based on these metrics and many more, IART holds a Value grade of B, while PEN has a Value grade of D.
IART has seen stronger estimate revision activity and sports more attractive valuation metrics than PEN, so it seems like value investors will conclude that IART is the superior option right now.
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Integra LifeSciences Holdings Corporation (IART): Free Stock Analysis Report
Penumbra, Inc. (PEN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).