Investors interested in Medical - Dental Supplies stocks are likely familiar with Henry Schein (HSIC - Free Report) and Merit Medical (MMSI - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Henry Schein has a Zacks Rank of #2 (Buy), while Merit Medical has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HSIC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
HSIC currently has a forward P/E ratio of 21, while MMSI has a forward P/E of 39.60. We also note that HSIC has a PEG ratio of 2.49. 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. MMSI currently has a PEG ratio of 3.07.
Another notable valuation metric for HSIC is its P/B ratio of 4.53. 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, MMSI has a P/B of 5.08.
These are just a few of the metrics contributing to HSIC's Value grade of B and MMSI's Value grade of C.
HSIC sticks out from MMSI in both our Zacks Rank and Style Scores models, so value investors will likely feel that HSIC is the better option right now.