SGIOY or ZTS: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Medical - Drugs sector have probably already heard of Shionogi & Co., Ltd. Unsponsored ADR (SGIOY) 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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Shionogi & Co., Ltd. Unsponsored ADR has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SGIOY has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

SGIOY currently has a forward P/E ratio of 11.99, while ZTS has a forward P/E of 24.79. We also note that SGIOY has a PEG ratio of 1.97. 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. ZTS currently has a PEG ratio of 2.57.

Another notable valuation metric for SGIOY is its P/B ratio of 1.62. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 14.86.

These are just a few of the metrics contributing to SGIOY's Value grade of A and ZTS's Value grade of C.

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

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

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