Investors with an interest in Medical - Products stocks have likely encountered both Envista (NVST) and Abbott (ABT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Envista has a Zacks Rank of #1 (Strong Buy), while Abbott has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NVST is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
NVST currently has a forward P/E ratio of 18.54, while ABT has a forward P/E of 25.63. We also note that NVST has a PEG ratio of 1.10. 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. ABT currently has a PEG ratio of 2.50.
Another notable valuation metric for NVST is its P/B ratio of 1.1. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ABT has a P/B of 4.52.
These are just a few of the metrics contributing to NVST's Value grade of B and ABT's Value grade of C.
NVST sticks out from ABT in both our Zacks Rank and Style Scores models, so value investors will likely feel that NVST is the better option right now.
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Envista Holdings Corporation (NVST): Free Stock Analysis Report Abbott Laboratories (ABT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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