Investors looking for stocks in the Medical - Drugs sector might want to consider either United Therapeutics (UTHR) or Zoetis (ZTS). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
United Therapeutics and Zoetis are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that UTHR likely has seen a stronger improvement to its earnings outlook than ZTS has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
UTHR currently has a forward P/E ratio of 18.07, while ZTS has a forward P/E of 19.10. We also note that UTHR has a PEG ratio of 2.61. 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. ZTS currently has a PEG ratio of 2.63.
Another notable valuation metric for UTHR is its P/B ratio of 3.28. 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, ZTS has a P/B of 10.62.
These metrics, and several others, help UTHR earn a Value grade of B, while ZTS has been given a Value grade of C.
UTHR 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 UTHR is likely the superior value option right now.
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United Therapeutics Corporation (UTHR): Free Stock Analysis Report Zoetis Inc. (ZTS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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