Investors interested in Medical Services stocks are likely familiar with Labcorp Holdings (LH) and Danaher (DHR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Both Labcorp Holdings and Danaher have a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
LH currently has a forward P/E ratio of 17.67, while DHR has a forward P/E of 27.42. We also note that LH has a PEG ratio of 1.85. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DHR currently has a PEG ratio of 2.94.
Another notable valuation metric for LH is its P/B ratio of 3.08. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DHR has a P/B of 3.13.
Based on these metrics and many more, LH holds a Value grade of B, while DHR has a Value grade of C.
Both LH and DHR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LH is the superior value option right now.
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Labcorp Holdings Inc. (LH): Free Stock Analysis Report
Danaher Corporation (DHR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).