Investors interested in stocks from the Medical Info Systems sector have probably already heard of Doximity (DOCS) and Hims & Hers Health, Inc. (HIMS). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Doximity and Hims & Hers Health, Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DOCS is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
DOCS currently has a forward P/E ratio of 11.33, while HIMS has a forward P/E of 553.35. We also note that DOCS has a PEG ratio of 0.90. 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. HIMS currently has a PEG ratio of 42.95.
Another notable valuation metric for DOCS is its P/B ratio of 3.5. 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, HIMS has a P/B of 12.38.
These metrics, and several others, help DOCS earn a Value grade of B, while HIMS has been given a Value grade of C.
DOCS has seen stronger estimate revision activity and sports more attractive valuation metrics than HIMS, so it seems like value investors will conclude that DOCS is the superior option right now.
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Doximity, Inc. (DOCS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).