Investors interested in Medical - Instruments stocks are likely familiar with Teleflex (TFX) and Penumbra (PEN). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Teleflex has a Zacks Rank of #2 (Buy), while Penumbra has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TFX has an improving earnings outlook. But this is only part of the picture 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.
TFX currently has a forward P/E ratio of 8.70, while PEN has a forward P/E of 69.12. We also note that TFX has a PEG ratio of 1.71. 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. PEN currently has a PEG ratio of 2.29.
Another notable valuation metric for TFX is its P/B ratio of 1.27. 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, PEN has a P/B of 7.66.
Based on these metrics and many more, TFX holds a Value grade of A, while PEN has a Value grade of D.
TFX has seen stronger estimate revision activity and sports more attractive valuation metrics than PEN, so it seems like value investors will conclude that TFX is the superior option right now.
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Teleflex Incorporated (TFX): Free Stock Analysis Report Penumbra, Inc. (PEN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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