Investors with an interest in Medical - Products stocks have likely encountered both Hill-Rom (HRC) and Baxter International (BAX). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Hill-Rom and Baxter International have a Zacks Rank of # 2 (Buy) right now. 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 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 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.
HRC currently has a forward P/E ratio of 18.78, while BAX has a forward P/E of 25.30. We also note that HRC has a PEG ratio of 1.36. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BAX currently has a PEG ratio of 1.89.
Another notable valuation metric for HRC is its P/B ratio of 3.82. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BAX has a P/B of 4.34.
These are just a few of the metrics contributing to HRC's Value grade of A and BAX's Value grade of C.
Both HRC and BAX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HRC is the superior value option right now.
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Hill-Rom Holdings, Inc. (HRC) : Free Stock Analysis Report
Baxter International Inc. (BAX) : Free Stock Analysis Report
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