Investors interested in Medical - Dental Supplies stocks are likely familiar with Merit Medical (MMSI - Free Report) and Align Technology (ALGN - Free Report) . 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Merit Medical has a Zacks Rank of #2 (Buy), while Align Technology has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MMSI has an improving earnings outlook. But this is only part of the picture for value investors.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
MMSI currently has a forward P/E ratio of 34.09, while ALGN has a forward P/E of 120.60. We also note that MMSI has a PEG ratio of 2.85. 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. ALGN currently has a PEG ratio of 9.77.
Another notable valuation metric for MMSI is its P/B ratio of 2.61. 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, ALGN has a P/B of 8.39.
These metrics, and several others, help MMSI earn a Value grade of B, while ALGN has been given a Value grade of D.
MMSI has seen stronger estimate revision activity and sports more attractive valuation metrics than ALGN, so it seems like value investors will conclude that MMSI is the superior option right now.