DSNKY vs. ZTS: Which Stock Is the Better Value Option?

Investors with an interest in Medical - Drugs stocks have likely encountered both Daiichi Sankyo Co., Ltd. - Sponsored ADR (DSNKY) and Zoetis (ZTS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 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.

Currently, Daiichi Sankyo Co., Ltd. - Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Zoetis has a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DSNKY has an improving earnings outlook. However, value investors will care about much more than just this.

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 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.

DSNKY currently has a forward P/E ratio of 21.96, while ZTS has a forward P/E of 27.23. We also note that DSNKY has a PEG ratio of 1.54. 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. ZTS currently has a PEG ratio of 2.82.

Another notable valuation metric for DSNKY is its P/B ratio of 4.63. 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, ZTS has a P/B of 16.32.

These metrics, and several others, help DSNKY earn a Value grade of B, while ZTS has been given a Value grade of C.

DSNKY stands above ZTS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DSNKY is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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