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GRFS vs. ZTS: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 mins read

Investors interested in stocks from the Medical - Drugs sector have probably already heard of Grifols (GRFS) and Zoetis (ZTS). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Grifols has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GRFS likely has seen a stronger improvement to its earnings outlook than ZTS has recently. But this is just one factor that value investors are interested in.

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.

GRFS currently has a forward P/E ratio of 14.77, while ZTS has a forward P/E of 34.43. We also note that GRFS has a PEG ratio of 1.06. 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. ZTS currently has a PEG ratio of 3.71.

Another notable valuation metric for GRFS is its P/B ratio of 1.75. 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, ZTS has a P/B of 22.15.

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

GRFS stands above ZTS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GRFS is the superior value option right now.

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Grifols, S.A. (GRFS) : Free Stock Analysis Report
Zoetis Inc. (ZTS) : Free Stock Analysis Report
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