Investors interested in stocks from the Medical Services sector have probably already heard of Icon PLC (ICLR) and HealthEquity (HQY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Icon PLC and HealthEquity are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. Investors should feel comfortable knowing that ICLR 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.
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.
ICLR currently has a forward P/E ratio of 19.80, while HQY has a forward P/E of 54.13. We also note that ICLR has a PEG ratio of 1.69. 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. HQY currently has a PEG ratio of 2.16.
Another notable valuation metric for ICLR is its P/B ratio of 5.38. 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 9.03.
Based on these metrics and many more, ICLR holds a Value grade of B, while HQY has a Value grade of F.
ICLR stands above HQY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ICLR is the superior value option right now.
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