Investors with an interest in Medical - Dental Supplies stocks have likely encountered both Patterson Cos. (PDCO - Free Report) and West Pharmaceutical Services (WST - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Both Patterson Cos. and West Pharmaceutical Services have a Zacks Rank of # 2 (Buy) right now. 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 piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
PDCO currently has a forward P/E ratio of 15.26, while WST has a forward P/E of 43.84. We also note that PDCO has a PEG ratio of 2.40. 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. WST currently has a PEG ratio of 3.13.
Another notable valuation metric for PDCO is its P/B ratio of 1.42. 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, WST has a P/B of 7.53.
These are just a few of the metrics contributing to PDCO's Value grade of A and WST's Value grade of C.
Both PDCO and WST are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PDCO is the superior value option right now.