Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either Dentsply International (XRAY - Free Report) or Conmed (CNMD - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Dentsply International has a Zacks Rank of #2 (Buy), while Conmed has a Zacks Rank of #3 (Hold). This means that XRAY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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 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.
XRAY currently has a forward P/E ratio of 20.92, while CNMD has a forward P/E of 33.22. We also note that XRAY has a PEG ratio of 1.77. 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. CNMD currently has a PEG ratio of 2.21.
Another notable valuation metric for XRAY is its P/B ratio of 2.51. 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, CNMD has a P/B of 4.18.
These metrics, and several others, help XRAY earn a Value grade of B, while CNMD has been given a Value grade of C.
XRAY has seen stronger estimate revision activity and sports more attractive valuation metrics than CNMD, so it seems like value investors will conclude that XRAY is the superior option right now.