XRAY vs. MMSI: Which Stock Is the Better Value Option?

Investors interested in Medical - Dental Supplies stocks are likely familiar with Dentsply International (XRAY) and Merit Medical (MMSI). 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.

Dentsply International has a Zacks Rank of #2 (Buy), while Merit Medical has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that XRAY has an improving earnings 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.

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.

XRAY currently has a forward P/E ratio of 8.32, while MMSI has a forward P/E of 25.17. We also note that XRAY has a PEG ratio of 1.13. 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. MMSI currently has a PEG ratio of 2.41.

Another notable valuation metric for XRAY is its P/B ratio of 1.56. 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, MMSI has a P/B of 3.5.

These metrics, and several others, help XRAY earn a Value grade of A, while MMSI has been given a Value grade of C.

XRAY stands above MMSI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that XRAY is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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