Investors with an interest in Medical Services stocks have likely encountered both Bausch + Lomb (BLCO) and Danaher (DHR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Bausch + Lomb and Danaher 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 BLCO is likely seeing its earnings outlook improve to a greater extent. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BLCO currently has a forward P/E ratio of 21.25, while DHR has a forward P/E of 25.81. We also note that BLCO has a PEG ratio of 0.99. 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. DHR currently has a PEG ratio of 2.93.
Another notable valuation metric for BLCO is its P/B ratio of 0.93. 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, DHR has a P/B of 2.91.
Based on these metrics and many more, BLCO holds a Value grade of A, while DHR has a Value grade of D.
BLCO 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 BLCO is likely the superior value option right now.
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Bausch + Lomb Corporation (BLCO): Free Stock Analysis Report Danaher Corporation (DHR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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