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 companies is the best option for those looking for undervalued stocks? 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). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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 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 8.87, while HQY has a forward P/E of 31.21. We also note that MD has a PEG ratio of 0.93. 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. HQY currently has a PEG ratio of 1.50.
Another notable valuation metric for MD is its P/B ratio of 1.51. 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, HQY has a P/B of 4.59.
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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