Investors interested in Medical - Instruments stocks are likely familiar with Hologic (HOLX) and SONOVA HOLDING (SONVY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Currently, Hologic has a Zacks Rank of #2 (Buy), while SONOVA HOLDING has a Zacks Rank of #4 (Sell). This means that HOLX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
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.
HOLX currently has a forward P/E ratio of 16.64, while SONVY has a forward P/E of 21.56. We also note that HOLX has a PEG ratio of 2.13. 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. SONVY currently has a PEG ratio of 3.27.
Another notable valuation metric for HOLX is its P/B ratio of 3.3. 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, SONVY has a P/B of 5.13.
These are just a few of the metrics contributing to HOLX's Value grade of B and SONVY's Value grade of C.
HOLX has seen stronger estimate revision activity and sports more attractive valuation metrics than SONVY, so it seems like value investors will conclude that HOLX is the superior option right now.
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Hologic, Inc. (HOLX): Free Stock Analysis Report SONOVA HOLDING (SONVY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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