Investors interested in stocks from the Medical - Products sector have probably already heard of Phibro Animal Health (PAHC) and Lonza Group Ag (LZAGY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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 Lonza Group Ag 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 only part of the picture for value investors.
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 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.
PAHC currently has a forward P/E ratio of 9.76, while LZAGY has a forward P/E of 31.97. We also note that PAHC has a PEG ratio of 0.45. 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. LZAGY currently has a PEG ratio of 1.36.
Another notable valuation metric for PAHC is its P/B ratio of 3.64. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LZAGY has a P/B of 4.5.
These metrics, and several others, help PAHC earn a Value grade of A, while LZAGY has been given a Value grade of D.
PAHC has seen stronger estimate revision activity and sports more attractive valuation metrics than LZAGY, so it seems like value investors will conclude that PAHC is the superior option right now.
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Phibro Animal Health Corporation (PAHC): Free Stock Analysis Report
Lonza Group Ag (LZAGY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).