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PAHC vs. SRDX: Which Stock Should Value Investors Buy Now?

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Zacks Equity Research
·2 min read
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Investors interested in Medical - Products stocks are likely familiar with Phibro Animal Health (PAHC) and SurModics (SRDX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Phibro Animal Health and SurModics are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PAHC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

PAHC currently has a forward P/E ratio of 18.90, while SRDX has a forward P/E of 125.66. We also note that PAHC has a PEG ratio of 1.89. 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. SRDX currently has a PEG ratio of 12.57.

Another notable valuation metric for PAHC is its P/B ratio of 4.43. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SRDX has a P/B of 4.63.

These are just a few of the metrics contributing to PAHC's Value grade of B and SRDX's Value grade of C.

PAHC 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 PAHC is likely the superior value option right now.


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Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report
 
Surmodics, Inc. (SRDX) : Free Stock Analysis Report
 
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Zacks Investment Research