Investors interested in stocks from the Medical - Dental Supplies sector have probably already heard of LabCorp (LH - Free Report) and Dentsply International (XRAY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
LabCorp and Dentsply International are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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.
LH currently has a forward P/E ratio of 14.85, while XRAY has a forward P/E of 24.33. We also note that LH has a PEG ratio of 1.73. 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. XRAY currently has a PEG ratio of 2.12.
Another notable valuation metric for LH is its P/B ratio of 2.32. 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, XRAY has a P/B of 2.61.
Based on these metrics and many more, LH holds a Value grade of B, while XRAY has a Value grade of C.
Both LH and XRAY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LH is the superior value option right now.