Investors interested in stocks from the Medical - Products sector have probably already heard of Zimmer Biomet (ZBH) and EssilorLuxottica Unsponsored ADR (ESLOY). But which of these two stocks presents investors with the better value opportunity right now? 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.
Zimmer Biomet has a Zacks Rank of #2 (Buy), while EssilorLuxottica Unsponsored ADR 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 ZBH has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 12.80, while ESLOY has a forward P/E of 38.31. We also note that ZBH has a PEG ratio of 2.40. 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. ESLOY currently has a PEG ratio of 4.98.
Another notable valuation metric for ZBH is its P/B ratio of 1.65. 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, ESLOY has a P/B of 3.22.
These metrics, and several others, help ZBH earn a Value grade of A, while ESLOY has been given a Value grade of D.
ZBH has seen stronger estimate revision activity and sports more attractive valuation metrics than ESLOY, so it seems like value investors will conclude that ZBH is the superior option right now.
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Zimmer Biomet Holdings, Inc. (ZBH): Free Stock Analysis Report EssilorLuxottica Unsponsored ADR (ESLOY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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