Investors looking for stocks in the Medical - Instruments sector might want to consider either Fresenius (FMS) or Masimo (MASI). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Fresenius has a Zacks Rank of #2 (Buy), while Masimo has a Zacks Rank of #4 (Sell) right now. This means that FMS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
FMS currently has a forward P/E ratio of 9.26, while MASI has a forward P/E of 23.98. We also note that FMS has a PEG ratio of 0.73. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MASI currently has a PEG ratio of 1.41.
Another notable valuation metric for FMS is its P/B ratio of 0.82. 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, MASI has a P/B of 9.15.
These are just a few of the metrics contributing to FMS's Value grade of B and MASI's Value grade of C.
FMS 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 FMS is likely the superior value option right now.
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Fresenius Medical Care AG & Co. KGaA (FMS): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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