Investors with an interest in Medical - Dental Supplies stocks have likely encountered both McKesson (MCK - Free Report) and West Pharmaceutical Services (WST - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both McKesson and West Pharmaceutical Services are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
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.
MCK currently has a forward P/E ratio of 10.20, while WST has a forward P/E of 47.29. We also note that MCK has a PEG ratio of 1.48. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WST currently has a PEG ratio of 4.13.
Another notable valuation metric for MCK is its P/B ratio of 3.35. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WST has a P/B of 7.40.
These are just a few of the metrics contributing to MCK's Value grade of A and WST's Value grade of C.
Both MCK and WST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MCK is the superior value option right now.