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ESRX vs. HQY: Which Stock Is the Better Value Option?

Hertz (HTZ) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors looking for stocks in the Medical Services sector might want to consider either Express Scripts (ESRX) or HealthEquity (HQY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Express Scripts has a Zacks Rank of #2 (Buy), while HealthEquity has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ESRX is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

ESRX currently has a forward P/E ratio of 10.89, while HQY has a forward P/E of 75.24. We also note that ESRX has a PEG ratio of 1.25. 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. HQY currently has a PEG ratio of 2.26.

Another notable valuation metric for ESRX is its P/B ratio of 2.71. 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, HQY has a P/B of 11.35.

These are just a few of the metrics contributing to ESRX's Value grade of A and HQY's Value grade of D.

ESRX sticks out from HQY in both our Zacks Rank and Style Scores models, so value investors will likely feel that ESRX is the better option right now.


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