Investors interested in stocks from the Medical - Products sector have probably already heard of Royal Philips (PHG) and LeMaitre Vascular (LMAT). But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Royal Philips is sporting a Zacks Rank of #2 (Buy), while LeMaitre Vascular has a Zacks Rank of #3 (Hold). This means that PHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
PHG currently has a forward P/E ratio of 18.60, while LMAT has a forward P/E of 39.31. We also note that PHG has a PEG ratio of 0.77. 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. LMAT currently has a PEG ratio of 2.31.
Another notable valuation metric for PHG is its P/B ratio of 2.31. 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, LMAT has a P/B of 5.59.
These are just a few of the metrics contributing to PHG's Value grade of A and LMAT's Value grade of D.
PHG has seen stronger estimate revision activity and sports more attractive valuation metrics than LMAT, 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 LeMaitre Vascular, Inc. (LMAT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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