Investors with an interest in Medical - Products stocks have likely encountered both Medtronic (MDT) and EssilorLuxottica Unsponsored ADR (ESLOY). 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.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Medtronic is sporting a Zacks Rank of #2 (Buy), while EssilorLuxottica Unsponsored ADR has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MDT has an improving earnings 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.
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.
MDT currently has a forward P/E ratio of 17.47, while ESLOY has a forward P/E of 38.76. We also note that MDT has a PEG ratio of 2.60. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ESLOY currently has a PEG ratio of 3.87.
Another notable valuation metric for MDT is its P/B ratio of 2.59. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ESLOY has a P/B of 3.41.
Based on these metrics and many more, MDT holds a Value grade of B, while ESLOY has a Value grade of D.
MDT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that MDT is likely the superior value option right now.
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Medtronic PLC (MDT): Free Stock Analysis Report EssilorLuxottica Unsponsored ADR (ESLOY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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