Investors interested in stocks from the Medical Services sector have probably already heard of Avantor, Inc. (AVTR) and Alignment Healthcare (ALHC). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Avantor, Inc. and Alignment Healthcare are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AVTR is likely seeing its earnings outlook improve to a greater extent. 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.
AVTR currently has a forward P/E ratio of 12.47, while ALHC has a forward P/E of 213.30. We also note that AVTR has a PEG ratio of 3.86. 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. ALHC currently has a PEG ratio of 5.62.
Another notable valuation metric for AVTR is its P/B ratio of 1.36. 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, ALHC has a P/B of 26.37.
These metrics, and several others, help AVTR earn a Value grade of A, while ALHC has been given a Value grade of C.
AVTR 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 AVTR is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Avantor, Inc. (AVTR): Free Stock Analysis Report Alignment Healthcare, Inc. (ALHC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
