Investors looking for stocks in the Medical Services sector might want to consider either Labcorp Holdings (LH) or Medpace (MEDP). 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Labcorp Holdings has a Zacks Rank of #2 (Buy), while Medpace has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that LH likely has seen a stronger improvement to its earnings outlook than MEDP has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
LH currently has a forward P/E ratio of 14.37, while MEDP has a forward P/E of 25.18. We also note that LH has a PEG ratio of 1.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MEDP currently has a PEG ratio of 2.18.
Another notable valuation metric for LH is its P/B ratio of 2.43. 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, MEDP has a P/B of 20.48.
These are just a few of the metrics contributing to LH's Value grade of B and MEDP's Value grade of D.
LH 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 LH is likely the superior value option right now.
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Labcorp Holdings Inc. (LH): Free Stock Analysis Report
Medpace Holdings, Inc. (MEDP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).