Investors looking for stocks in the Medical Services sector might want to consider either Pediatrix Medical Group (MD) or HealthEquity (HQY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Currently, both Pediatrix Medical Group and HealthEquity are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
MD currently has a forward P/E ratio of 9.70, while HQY has a forward P/E of 28.08. We also note that MD has a PEG ratio of 1.02. 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. HQY currently has a PEG ratio of 1.38.
Another notable valuation metric for MD is its P/B ratio of 1.65. 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, HQY has a P/B of 4.15.
These metrics, and several others, help MD earn a Value grade of B, while HQY has been given a Value grade of C.
Both MD and HQY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MD is the superior value option right now.
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Pediatrix Medical Group, Inc. (MD): Free Stock Analysis Report HealthEquity, Inc. (HQY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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