Investors interested in stocks from the Medical Info Systems sector have probably already heard of AllScripts Healthcare (MDRX) and HMS Holdings . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Right now, AllScripts Healthcare is sporting a Zacks Rank of #2 (Buy), while HMS Holdings has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MDRX has an improving earnings outlook. But this is just one piece of the puzzle 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.
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.
MDRX currently has a forward P/E ratio of 15.20, while HMSY has a forward P/E of 28.39. We also note that MDRX has a PEG ratio of 1.65. 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. HMSY currently has a PEG ratio of 2.58.
Another notable valuation metric for MDRX is its P/B ratio of 1.31. 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, HMSY has a P/B of 4.03.
These metrics, and several others, help MDRX earn a Value grade of A, while HMSY has been given a Value grade of C.
MDRX sticks out from HMSY in both our Zacks Rank and Style Scores models, so value investors will likely feel that MDRX is the better option right now.