Investors interested in stocks from the Medical - Products sector have probably already heard of Prestige Consumer Healthcare (PBH) and Abbott (ABT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Prestige Consumer Healthcare has a Zacks Rank of #2 (Buy), while Abbott has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that PBH likely has seen a stronger improvement to its earnings outlook than ABT has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
PBH currently has a forward P/E ratio of 13.54, while ABT has a forward P/E of 24.64. We also note that PBH has a PEG ratio of 1.93. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ABT currently has a PEG ratio of 2.31.
Another notable valuation metric for PBH is its P/B ratio of 1.66. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ABT has a P/B of 4.3.
Based on these metrics and many more, PBH holds a Value grade of A, while ABT has a Value grade of C.
PBH stands above ABT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PBH is the superior value option right now.
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Prestige Consumer Healthcare Inc. (PBH): Free Stock Analysis Report Abbott Laboratories (ABT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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