Investors interested in Medical - Dental Supplies stocks are likely familiar with McKesson (MCK) and Align Technology (ALGN). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
McKesson and Align Technology are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MCK 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 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.
MCK currently has a forward P/E ratio of 9.98, while ALGN has a forward P/E of 45.21. We also note that MCK has a PEG ratio of 1.43. 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. ALGN currently has a PEG ratio of 2.08.
Another notable valuation metric for MCK is its P/B ratio of 3.87. 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, ALGN has a P/B of 17.71.
These metrics, and several others, help MCK earn a Value grade of A, while ALGN has been given a Value grade of D.
MCK is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that MCK is likely the superior value option right now.
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McKesson Corporation (MCK) : Free Stock Analysis Report
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