Investors interested in stocks from the Medical - Instruments sector have probably already heard of IQVIA Holdings (IQV) and Penumbra (PEN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, IQVIA Holdings is sporting a Zacks Rank of #2 (Buy), while Penumbra has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that IQV has an improving earnings 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.
IQV currently has a forward P/E ratio of 16.21, while PEN has a forward P/E of 63.35. We also note that IQV has a PEG ratio of 1.61. 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 1.97.
Another notable valuation metric for IQV is its P/B ratio of 5.55. 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 8.51.
These are just a few of the metrics contributing to IQV's Value grade of B and PEN's Value grade of F.
IQV 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 IQV is likely the superior value option right now.
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IQVIA Holdings Inc. (IQV): Free Stock Analysis Report
Penumbra, Inc. (PEN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).