Investors with an interest in Medical - Instruments stocks have likely encountered both Fresenius (FMS) and Masimo (MASI). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Fresenius has a Zacks Rank of #2 (Buy), while Masimo has a Zacks Rank of #3 (Hold) 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. But this is just one factor that value investors are interested in.
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.
FMS currently has a forward P/E ratio of 8.93, while MASI has a forward P/E of 24.52. We also note that FMS has a PEG ratio of 0.70. 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. MASI currently has a PEG ratio of 1.43.
Another notable valuation metric for FMS is its P/B ratio of 0.79. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MASI has a P/B of 9.38.
These are just a few of the metrics contributing to FMS's Value grade of B and MASI's Value grade of C.
FMS stands above MASI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FMS is 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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