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ESRX or HQY: Which Is the Better Value Stock Right Now?

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Investors with an interest in Medical Services stocks have likely encountered both Express Scripts and HealthEquity (HQY - 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.

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.

Express Scripts and HealthEquity 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 ESRX is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

ESRX currently has a forward P/E ratio of 10.67, while HQY has a forward P/E of 68.39. We also note that ESRX has a PEG ratio of 1.22. 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. HQY currently has a PEG ratio of 2.06.

Another notable valuation metric for ESRX is its P/B ratio of 2.66. 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, HQY has a P/B of 10.96.

Based on these metrics and many more, ESRX holds a Value grade of A, while HQY has a Value grade of D.

ESRX has seen stronger estimate revision activity and sports more attractive valuation metrics than HQY, so it seems like value investors will conclude that ESRX is the superior option right now.


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