Investors looking for stocks in the Medical Info Systems sector might want to consider either AllScripts Healthcare (MDRX - Free Report) or Nextgen Healthcare (NXGN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
AllScripts Healthcare has a Zacks Rank of #2 (Buy), while Nextgen Healthcare has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MDRX 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 try to analyze a wide range of traditional figures and metrics to help determine whether 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.
MDRX currently has a forward P/E ratio of 14.09, while NXGN has a forward P/E of 17.59. We also note that MDRX has a PEG ratio of 1.37. 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. NXGN currently has a PEG ratio of 2.04.
Another notable valuation metric for MDRX is its P/B ratio of 1.10. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NXGN has a P/B of 2.58.
Based on these metrics and many more, MDRX holds a Value grade of A, while NXGN has a Value grade of C.
MDRX stands above NXGN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MDRX is the superior value option right now.