Investors interested in stocks from the Medical - Dental Supplies sector have probably already heard of McKesson (MCK) and Cooper Cos. (COO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
McKesson and Cooper Cos. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MCK has an improving earnings outlook. But this is just one piece of the puzzle 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
MCK currently has a forward P/E ratio of 9.99, while COO has a forward P/E of 24.80. We also note that MCK has a PEG ratio of 1.45. 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. COO currently has a PEG ratio of 2.31.
Another notable valuation metric for MCK is its P/B ratio of 3.29. 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, COO has a P/B of 4.19.
Based on these metrics and many more, MCK holds a Value grade of A, while COO has a Value grade of C.
MCK has seen stronger estimate revision activity and sports more attractive valuation metrics than COO, so it seems like value investors will conclude that MCK is the superior option right now.
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McKesson Corporation (MCK) : Free Stock Analysis Report
The Cooper Companies, Inc. (COO) : Free Stock Analysis Report
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