Investors with an interest in Medical - Products stocks have likely encountered both GE HealthCare Technologies (GEHC) and Stryker (SYK). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
GE HealthCare Technologies has a Zacks Rank of #2 (Buy), while Stryker has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that GEHC likely has seen a stronger improvement to its earnings outlook than SYK has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
GEHC currently has a forward P/E ratio of 15.89, while SYK has a forward P/E of 24.22. We also note that GEHC has a PEG ratio of 1.75. 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. SYK currently has a PEG ratio of 2.11.
Another notable valuation metric for GEHC is its P/B ratio of 3.47. 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, SYK has a P/B of 6.16.
Based on these metrics and many more, GEHC holds a Value grade of A, while SYK has a Value grade of C.
GEHC has seen stronger estimate revision activity and sports more attractive valuation metrics than SYK, so it seems like value investors will conclude that GEHC is the superior option right now.
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GE HealthCare Technologies Inc. (GEHC): Free Stock Analysis Report Stryker Corporation (SYK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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