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CTLT vs. ZTS: Which Stock Is the Better Value Option?

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Investors interested in Medical - Drugs stocks are likely familiar with Catalent (CTLT - Free Report) and Zoetis (ZTS - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Catalent and Zoetis 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 CTLT 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.

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.

CTLT currently has a forward P/E ratio of 22.50, while ZTS has a forward P/E of 27.70. We also note that CTLT has a PEG ratio of 1.54. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZTS currently has a PEG ratio of 1.87.

Another notable valuation metric for CTLT is its P/B ratio of 5.35. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 20.72.

Based on these metrics and many more, CTLT holds a Value grade of B, while ZTS has a Value grade of C.

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




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