ERFSF vs. HQY: Which Stock Should Value Investors Buy Now?
Investors interested in Medical Services stocks are likely familiar with EUROFINS SCIENT (ERFSF) and HealthEquity (HQY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, EUROFINS SCIENT has a Zacks Rank of #1 (Strong Buy), while HealthEquity has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that ERFSF likely has seen a stronger improvement to its earnings outlook than HQY has recently. But this is only part of the picture 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ERFSF currently has a forward P/E ratio of 24, while HQY has a forward P/E of 46.23. We also note that ERFSF has a PEG ratio of 1.47. 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. HQY currently has a PEG ratio of 2.32.
Another notable valuation metric for ERFSF is its P/B ratio of 2.54. 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, HQY has a P/B of 3.86.
These metrics, and several others, help ERFSF earn a Value grade of B, while HQY has been given a Value grade of D.
ERFSF stands above HQY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ERFSF is the superior value option right now.
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