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CVS vs. DHR: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Medical Services sector have probably already heard of CVS Health (CVS - Free Report) and Danaher (DHR - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

CVS Health and Danaher are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CVS is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CVS currently has a forward P/E ratio of 11.14, while DHR has a forward P/E of 26.17. We also note that CVS has a PEG ratio of 0.98. 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. DHR currently has a PEG ratio of 2.83.

Another notable valuation metric for CVS is its P/B ratio of 1.12. 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, DHR has a P/B of 2.84.

These metrics, and several others, help CVS earn a Value grade of A, while DHR has been given a Value grade of D.

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


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