ABC vs. WST: Which Stock Is the Better Value Option?
Investors with an interest in Medical - Dental Supplies stocks have likely encountered both AmerisourceBergen (ABC) and West Pharmaceutical Services (WST). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both AmerisourceBergen and West Pharmaceutical Services are sporting 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 both of these companies have improving earnings outlooks. 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.
ABC currently has a forward P/E ratio of 12.07, while WST has a forward P/E of 46.65. We also note that ABC has a PEG ratio of 1.52. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WST currently has a PEG ratio of 4.07.
Another notable valuation metric for ABC is its P/B ratio of 5.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WST has a P/B of 7.30.
These are just a few of the metrics contributing to ABC's Value grade of A and WST's Value grade of C.
Both ABC and WST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ABC is the superior value option right now.
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AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
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