Investors interested in Medical - Drugs stocks are likely familiar with Merck KGaA (MKKGY) and United Therapeutics (UTHR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Merck KGaA is sporting a Zacks Rank of #2 (Buy), while United Therapeutics has a Zacks Rank of #3 (Hold). This means that MKKGY'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 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 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.
MKKGY currently has a forward P/E ratio of 13.58, while UTHR has a forward P/E of 17.06. We also note that MKKGY has a PEG ratio of 3.23. 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. UTHR currently has a PEG ratio of 4.96.
Another notable valuation metric for MKKGY is its P/B ratio of 0.53. 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, UTHR has a P/B of 3.12.
These are just a few of the metrics contributing to MKKGY's Value grade of A and UTHR's Value grade of C.
MKKGY sticks out from UTHR in both our Zacks Rank and Style Scores models, so value investors will likely feel that MKKGY is the better option right now.
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Merck KGaA (MKKGY): Free Stock Analysis Report United Therapeutics Corporation (UTHR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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