Investors interested in stocks from the Medical Services sector have probably already heard of Solventum (SOLV) and Medpace (MEDP). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Solventum and Medpace are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that SOLV likely has seen a stronger improvement to its earnings outlook than MEDP has recently. But this is just one factor that value investors are interested in.
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.
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.
SOLV currently has a forward P/E ratio of 12.28, while MEDP has a forward P/E of 38.87. We also note that SOLV has a PEG ratio of 2.97. 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. MEDP currently has a PEG ratio of 3.39.
Another notable valuation metric for SOLV is its P/B ratio of 3.46. 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, MEDP has a P/B of 88.94.
These are just a few of the metrics contributing to SOLV's Value grade of B and MEDP's Value grade of D.
SOLV stands above MEDP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SOLV is the superior value option right now.
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Solventum Corporation (SOLV): Free Stock Analysis Report Medpace Holdings, Inc. (MEDP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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