Investors interested in stocks from the Medical - Drugs sector have probably already heard of Sandoz Group AG Sponsored ADR (SDZNY) and Zoetis (ZTS). 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.
Right now, both Sandoz Group AG Sponsored ADR and Zoetis are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.
SDZNY currently has a forward P/E ratio of 18.41, while ZTS has a forward P/E of 22.64. We also note that SDZNY has a PEG ratio of 1.02. 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. ZTS currently has a PEG ratio of 2.31.
Another notable valuation metric for SDZNY is its P/B ratio of 2.92. 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, ZTS has a P/B of 12.8.
These are just a few of the metrics contributing to SDZNY's Value grade of B and ZTS's Value grade of C.
Both SDZNY and ZTS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SDZNY is the superior value option right now.
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Sandoz Group AG Sponsored ADR (SDZNY): Free Stock Analysis Report Zoetis Inc. (ZTS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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