Investors looking for stocks in the Medical – Dental Supplies sector might want to consider either McKesson (MCK) or Align Technology (ALGN). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to 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 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.
McKesson and Align Technology are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that MCK likely has seen a stronger improvement to its earnings outlook than ALGN has recently. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
MCK currently has a forward P/E ratio of 9.62, while ALGN has a forward P/E of 34.99. We also note that MCK has a PEG ratio of 1.39. 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. ALGN currently has a PEG ratio of 1.44.
Another notable valuation metric for MCK is its P/B ratio of 3.17. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ALGN has a P/B of 10.65.
These metrics, and several others, help MCK earn a Value grade of A, while ALGN has been given a Value grade of D.
MCK stands above ALGN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MCK is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment