SNN vs. BSX: Which Stock Is the Better Value Option?

Investors interested in Medical - Products stocks are likely familiar with Smith & Nephew (SNN) and Boston Scientific (BSX). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Smith & Nephew has a Zacks Rank of #2 (Buy), while Boston Scientific has a Zacks Rank of #4 (Sell) right now. This means that SNN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

SNN currently has a forward P/E ratio of 13.52, while BSX has a forward P/E of 16.84. We also note that SNN has a PEG ratio of 0.96. 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. BSX currently has a PEG ratio of 1.04.

Another notable valuation metric for SNN is its P/B ratio of 2.48. 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, BSX has a P/B of 3.24.

These are just a few of the metrics contributing to SNN's Value grade of A and BSX's Value grade of C.

SNN stands above BSX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SNN is the superior value option right now.

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

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