SOLV vs. DHR: Which Stock Is the Better Value Option?

Investors interested in Medical Services stocks are likely familiar with Solventum (SOLV) and Danaher (DHR). 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.

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.

Solventum and Danaher are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that SOLV likely has seen a stronger improvement to its earnings outlook than DHR has recently. 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.

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.

SOLV currently has a forward P/E ratio of 12.30, while DHR has a forward P/E of 27.96. We also note that SOLV has a PEG ratio of 2.87. 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. DHR currently has a PEG ratio of 3.31.

Another notable valuation metric for SOLV is its P/B ratio of 2.57. 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, DHR has a P/B of 2.98.

Based on these metrics and many more, SOLV holds a Value grade of B, while DHR has a Value grade of D.

SOLV has seen stronger estimate revision activity and sports more attractive valuation metrics than DHR, so it seems like value investors will conclude that SOLV is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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