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ZBH vs. MDT: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in Medical - Products stocks are likely familiar with Zimmer Biomet (ZBH) and Medtronic (MDT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Right now, both Zimmer Biomet and Medtronic are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.

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.

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.

ZBH currently has a forward P/E ratio of 17.52, while MDT has a forward P/E of 19.40. We also note that ZBH has a PEG ratio of 2.45. 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. MDT currently has a PEG ratio of 2.65.

Another notable valuation metric for ZBH is its P/B ratio of 2.41. 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, MDT has a P/B of 2.86.

These metrics, and several others, help ZBH earn a Value grade of B, while MDT has been given a Value grade of C.

Both ZBH and MDT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ZBH is the superior value option right now.


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Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
 
Medtronic PLC (MDT) : Free Stock Analysis Report
 
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