Investors interested in stocks from the Medical Info Systems sector have probably already heard of Cerner (CERN) and Tabula Rasa Healthcare (TRHC). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Cerner and Tabula Rasa Healthcare are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that CERN likely has seen a stronger improvement to its earnings outlook than TRHC 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CERN currently has a forward P/E ratio of 23.94, while TRHC has a forward P/E of 83.01. We also note that CERN has a PEG ratio of 1.88. 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. TRHC currently has a PEG ratio of 2.31.
Another notable valuation metric for CERN is its P/B ratio of 5.35. 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, TRHC has a P/B of 6.89.
Based on these metrics and many more, CERN holds a Value grade of B, while TRHC has a Value grade of D.
CERN has seen stronger estimate revision activity and sports more attractive valuation metrics than TRHC, so it seems like value investors will conclude that CERN is the superior option right now.
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Cerner Corporation (CERN) : Free Stock Analysis Report
Tabula Rasa Healthcare Inc. (TRHC) : Free Stock Analysis Report
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