Investors interested in stocks from the Medical - Drugs sector have probably already heard of Catalent (CTLT - Free Report) and Zoetis (ZTS - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Catalent is sporting a Zacks Rank of #2 (Buy), while Zoetis 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 CTLT has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
CTLT currently has a forward P/E ratio of 24.93, while ZTS has a forward P/E of 28.55. We also note that CTLT has a PEG ratio of 1.88. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ZTS currently has a PEG ratio of 1.93.
Another notable valuation metric for CTLT is its P/B ratio of 5.22. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ZTS has a P/B of 21.38.
These are just a few of the metrics contributing to CTLT's Value grade of B and ZTS's Value grade of C.
CTLT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CTLT is likely the superior value option right now.