Investors interested in Medical Services stocks are likely familiar with Premier, Inc. (PINC) and HealthEquity (HQY). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Premier, Inc. is sporting a Zacks Rank of #2 (Buy), while HealthEquity has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PINC 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 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.
PINC currently has a forward P/E ratio of 12.05, while HQY has a forward P/E of 59.94. We also note that PINC has a PEG ratio of 1.19. 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. HQY currently has a PEG ratio of 2.24.
Another notable valuation metric for PINC is its P/B ratio of 1.67. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HQY has a P/B of 3.47.
Based on these metrics and many more, PINC holds a Value grade of A, while HQY has a Value grade of D.
PINC 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 PINC is likely the superior value option right now.
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