TFX or PEN: Which Is the Better Value Stock Right Now?

Investors interested in Medical - Instruments stocks are likely familiar with Teleflex (TFX) 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Teleflex and Penumbra are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that TFX likely has seen a stronger improvement to its earnings outlook than PEN has recently. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

TFX currently has a forward P/E ratio of 20.49, while PEN has a forward P/E of 64.57. We also note that TFX has a PEG ratio of 0.99. 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. PEN currently has a PEG ratio of 2.01.

Another notable valuation metric for TFX is its P/B ratio of 2.14. 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, PEN has a P/B of 8.35.

These are just a few of the metrics contributing to TFX's Value grade of B and PEN's Value grade of D.

TFX sticks out from PEN in both our Zacks Rank and Style Scores models, so value investors will likely feel that TFX is the better option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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