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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
AllScripts Healthcare and HMS Holdings are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
MDRX currently has a forward P/E ratio of 12.58, while HMSY has a forward P/E of 23. We also note that MDRX has a PEG ratio of 1.20. 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. HMSY currently has a PEG ratio of 2.09.
Another notable valuation metric for MDRX is its P/B ratio of 1.26. 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, HMSY has a P/B of 3.16.
These are just a few of the metrics contributing to MDRX's Value grade of A and HMSY's Value grade of C.
Both MDRX and HMSY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MDRX is the superior value option right now.