Investors with an interest in Medical - Dental Supplies stocks have likely encountered both Merit Medical (MMSI) and Straumann Holding AG (SAUHY). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Merit Medical has a Zacks Rank of #2 (Buy), while Straumann Holding AG has a Zacks Rank of #3 (Hold) right now. This means that MMSI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
MMSI currently has a forward P/E ratio of 20.07, while SAUHY has a forward P/E of 28.57. We also note that MMSI has a PEG ratio of 1.95. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SAUHY currently has a PEG ratio of 2.78.
Another notable valuation metric for MMSI is its P/B ratio of 3.15. 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, SAUHY has a P/B of 8.14.
Based on these metrics and many more, MMSI holds a Value grade of B, while SAUHY has a Value grade of C.
MMSI sticks out from SAUHY in both our Zacks Rank and Style Scores models, so value investors will likely feel that MMSI is the better option right now.
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Merit Medical Systems, Inc. (MMSI): Free Stock Analysis Report Straumann Holding AG (SAUHY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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