XRAY vs. MMSI: Which Stock Is the Better Value Option?

Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either Dentsply International (XRAY) or Merit Medical (MMSI). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Dentsply International and Merit Medical are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that XRAY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

XRAY currently has a forward P/E ratio of 8.25, while MMSI has a forward P/E of 27.73. We also note that XRAY has a PEG ratio of 1.12. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MMSI currently has a PEG ratio of 2.70.

Another notable valuation metric for XRAY is its P/B ratio of 1.55. 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, MMSI has a P/B of 3.85.

These are just a few of the metrics contributing to XRAY's Value grade of A and MMSI's Value grade of D.

XRAY sticks out from MMSI in both our Zacks Rank and Style Scores models, so value investors will likely feel that XRAY is the better option right now.

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

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