Investors with an interest in Medical - Drugs stocks have likely encountered both Jazz Pharmaceuticals (JAZZ) 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Jazz Pharmaceuticals and Zoetis are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
JAZZ currently has a forward P/E ratio of 8.88, while ZTS has a forward P/E of 29.39. We also note that JAZZ has a PEG ratio of 0.96. 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. ZTS currently has a PEG ratio of 2.25.
Another notable valuation metric for JAZZ is its P/B ratio of 2.84. 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 22.38.
Based on these metrics and many more, JAZZ holds a Value grade of A, while ZTS has a Value grade of D.
Both JAZZ and ZTS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that JAZZ is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Jazz Pharmaceuticals PLC (JAZZ) : Free Stock Analysis Report
Zoetis Inc. (ZTS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research