Back to top

Image: Bigstock

Should Value Investors Buy These Medical Stocks?

Read MoreHide Full Article

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is AmerisourceBergen (ABC - Free Report) . ABC is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 12.64 right now. For comparison, its industry sports an average P/E of 18.43. Over the past 52 weeks, ABC's Forward P/E has been as high as 4,387.73 and as low as 10.53, with a median of 11.89.

ABC is also sporting a PEG ratio of 1.54. 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. ABC's PEG compares to its industry's average PEG of 1.80. ABC's PEG has been as high as 549.15 and as low as 0.94, with a median of 1.05, all within the past year.

Finally, investors should note that ABC has a P/CF ratio of 13.43. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 50.24. ABC's P/CF has been as high as 13.72 and as low as -8.74, with a median of -7.27, all within the past year.

McKesson (MCK - Free Report) may be another strong Medical - Dental Supplies stock to add to your shortlist. MCK is a # 2 (Buy) stock with a Value grade of A.

McKesson is trading at a forward earnings multiple of 11.87 at the moment, with a PEG ratio of 1. This compares to its industry's average P/E of 18.43 and average PEG ratio of 1.80.

Over the last 12 months, MCK's P/E has been as high as 12.42, as low as 9.17, with a median of 10.05, and its PEG ratio has been as high as 1.73, as low as 0.96, with a median of 1.33.

McKesson also has a P/B ratio of -51.62 compared to its industry's price-to-book ratio of 6. Over the past year, its P/B ratio has been as high as 184.34, as low as -717.21, with a median of -347.85.

These are only a few of the key metrics included in AmerisourceBergen and McKesson strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, ABC and MCK look like an impressive value stock at the moment.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

AmerisourceBergen Corporation (ABC) - free report >>

McKesson Corporation (MCK) - free report >>

Published in