Investors interested in stocks from the Medical - Products sector have probably already heard of Royal Philips (PHG) and Lonza Group Ag (LZAGY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Royal Philips is sporting a Zacks Rank of #2 (Buy), while Lonza Group Ag has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PHG is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PHG currently has a forward P/E ratio of 17.92, while LZAGY has a forward P/E of 33.33. We also note that PHG has a PEG ratio of 0.74. 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. LZAGY currently has a PEG ratio of 2.06.
Another notable valuation metric for PHG is its P/B ratio of 2.28. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LZAGY has a P/B of 4.71.
These metrics, and several others, help PHG earn a Value grade of A, while LZAGY has been given a Value grade of D.
PHG has seen stronger estimate revision activity and sports more attractive valuation metrics than LZAGY, so it seems like value investors will conclude that PHG is the superior option right now.
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Koninklijke Philips N.V. (PHG): Free Stock Analysis Report Lonza Group Ag (LZAGY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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