Investors with an interest in Medical - Products stocks have likely encountered both Prestige Consumer Healthcare (PBH) and Stryker (SYK). But which of these two stocks presents investors with the better value opportunity right now? 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.
Currently, Prestige Consumer Healthcare has a Zacks Rank of #1 (Strong Buy), while Stryker has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PBH has an improving earnings outlook. 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.
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.
PBH currently has a forward P/E ratio of 11.78, while SYK has a forward P/E of 23.17. We also note that PBH has a PEG ratio of 1.68. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SYK currently has a PEG ratio of 2.22.
Another notable valuation metric for PBH is its P/B ratio of 1.32. 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, SYK has a P/B of 5.57.
These metrics, and several others, help PBH earn a Value grade of B, while SYK has been given a Value grade of C.
PBH 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 PBH is likely the superior value option right now.
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Prestige Consumer Healthcare Inc. (PBH): Free Stock Analysis Report
Stryker Corporation (SYK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).