Investors with an interest in Medical - Products stocks have likely encountered both Smith & Nephew (SNN) and Stryker (SYK). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Smith & Nephew and Stryker are holding a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SNN currently has a forward P/E ratio of 18.82, while SYK has a forward P/E of 28.99. We also note that SNN has a PEG ratio of 1.03. 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. SYK currently has a PEG ratio of 2.85.
Another notable valuation metric for SNN is its P/B ratio of 2.96. 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, SYK has a P/B of 7.06.
These metrics, and several others, help SNN earn a Value grade of A, while SYK has been given a Value grade of D.
Both SNN and SYK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SNN is the superior value option right now.
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Smith & Nephew SNATS, Inc. (SNN): Free Stock Analysis Report Stryker Corporation (SYK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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