Investors interested in stocks from the Medical - Products sector have probably already heard of PetIQ (PETQ) and Medtronic (MDT). But which of these two companies is the best option for those looking for undervalued stocks? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
PetIQ and Medtronic 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 PETQ has an improving earnings outlook. But this is just one piece of the puzzle 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 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.
PETQ currently has a forward P/E ratio of 16.38, while MDT has a forward P/E of 18.26. We also note that PETQ has a PEG ratio of 0.66. 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. MDT currently has a PEG ratio of 2.58.
Another notable valuation metric for PETQ is its P/B ratio of 2.17. 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, MDT has a P/B of 2.56.
These are just a few of the metrics contributing to PETQ's Value grade of B and MDT's Value grade of C.
PETQ 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 PETQ is likely 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
PetIQ, Inc. (PETQ) : Free Stock Analysis Report
Medtronic PLC (MDT) : Free Stock Analysis Report
To read this article on Zacks.com click here.