Investors interested in Medical - Drugs stocks are likely familiar with USANA Health Sciences (USNA) and Zoetis (ZTS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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.
Right now, USANA Health Sciences is sporting a Zacks Rank of #1 (Strong Buy), while Zoetis has a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that USNA has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
USNA currently has a forward P/E ratio of 8.81, while ZTS has a forward P/E of 17.15. We also note that USNA has a PEG ratio of 0.73. 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. ZTS currently has a PEG ratio of 1.84.
Another notable valuation metric for USNA is its P/B ratio of 0.6. 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, ZTS has a P/B of 15.85.
These are just a few of the metrics contributing to USNA's Value grade of A and ZTS's Value grade of C.
USNA has seen stronger estimate revision activity and sports more attractive valuation metrics than ZTS, so it seems like value investors will conclude that USNA is the superior option right now.
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USANA Health Sciences, Inc. (USNA): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).