Investors interested in stocks from the Medical - Products sector have probably already heard of VAREX IMAGING (VREX) and NuVasive (NUVA). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, VAREX IMAGING has a Zacks Rank of #2 (Buy), while NuVasive 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 VREX has an improving earnings outlook. 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.
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.
VREX currently has a forward P/E ratio of 22.06, while NUVA has a forward P/E of 26.62. We also note that VREX has a PEG ratio of 2.21. 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. NUVA currently has a PEG ratio of 2.23.
Another notable valuation metric for VREX is its P/B ratio of 2.57. 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, NUVA has a P/B of 3.74.
Based on these metrics and many more, VREX holds a Value grade of A, while NUVA has a Value grade of C.
VREX sticks out from NUVA in both our Zacks Rank and Style Scores models, so value investors will likely feel that VREX is the better option right now.
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