Investors with an interest in Medical - Products stocks have likely encountered both Prestige Consumer Healthcare (PBH) and Abbott (ABT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Prestige Consumer Healthcare and Abbott are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, 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 13.79, while ABT has a forward P/E of 22.56. We also note that PBH has a PEG ratio of 1.97. 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. ABT currently has a PEG ratio of 2.12.
Another notable valuation metric for PBH is its P/B ratio of 1.69. 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 4.33.
These are just a few of the metrics contributing to PBH's Value grade of B and ABT's Value grade of C.
PBH has seen stronger estimate revision activity and sports more attractive valuation metrics than ABT, so it seems like value investors will conclude that PBH is the superior 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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