Investors interested in stocks from the Medical Services sector have probably already heard of PRA Health Sciences (PRAH) and HealthEquity (HQY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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, PRA Health Sciences is sporting a Zacks Rank of #2 (Buy), while HealthEquity has a Zacks Rank of #5 (Strong Sell). This means that PRAH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
PRAH currently has a forward P/E ratio of 21.22, while HQY has a forward P/E of 63.08. We also note that PRAH has a PEG ratio of 1.41. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HQY currently has a PEG ratio of 2.18.
Another notable valuation metric for PRAH is its P/B ratio of 6.59. 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 11.26.
These metrics, and several others, help PRAH earn a Value grade of B, while HQY has been given a Value grade of F.
PRAH 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 PRAH is likely the superior value option right now.
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PRA Health Sciences, Inc. (PRAH) : Free Stock Analysis Report
HealthEquity, Inc. (HQY) : Free Stock Analysis Report
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