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MCK vs. ALGN: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either McKesson (MCK) or Align Technology (ALGN - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.

Currently, McKesson has a Zacks Rank of #2 (Buy), while Align Technology 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 MCK has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

MCK currently has a forward P/E ratio of 10.43, while ALGN has a forward P/E of 41.25. 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. ALGN currently has a PEG ratio of 1.90.

Another notable valuation metric for MCK is its P/B ratio of 4.10. 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, ALGN has a P/B of 16.17.

Based on these metrics and many more, MCK holds a Value grade of A, while ALGN has a Value grade of C.

MCK sticks out from ALGN in both our Zacks Rank and Style Scores models, so value investors will likely feel that MCK is the better option right now.


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