Investors interested in stocks from the Medical Services sector have probably already heard of Syneos Health (SYNH - Free Report) and Charles River Laboratories (CRL - 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 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.
Currently, Syneos Health has a Zacks Rank of #2 (Buy), while Charles River Laboratories has a Zacks Rank of #3 (Hold). This means that SYNH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
SYNH currently has a forward P/E ratio of 18.94, while CRL has a forward P/E of 22.77. We also note that SYNH has a PEG ratio of 1.08. 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. CRL currently has a PEG ratio of 1.90.
Another notable valuation metric for SYNH is its P/B ratio of 1.88. 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, CRL has a P/B of 5.16.
Based on these metrics and many more, SYNH holds a Value grade of B, while CRL has a Value grade of C.
SYNH sticks out from CRL in both our Zacks Rank and Style Scores models, so value investors will likely feel that SYNH is the better option right now.