Investors with an interest in Medical - Products stocks have likely encountered both VAREX IMAGING (VREX) and Boston Scientific (BSX). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Currently, VAREX IMAGING has a Zacks Rank of #2 (Buy), while Boston Scientific has a Zacks Rank of #3 (Hold). This means that VREX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.
VREX currently has a forward P/E ratio of 20.61, while BSX has a forward P/E of 23.43. We also note that VREX has a PEG ratio of 2.06. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BSX currently has a PEG ratio of 2.14.
Another notable valuation metric for VREX is its P/B ratio of 2.46. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, BSX has a P/B of 6.15.
These are just a few of the metrics contributing to VREX's Value grade of B and BSX's Value grade of C.
VREX stands above BSX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VREX is the superior value option right now.
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