Investors interested in Medical - Products stocks are likely familiar with Perrigo (PRGO - Free Report) and Phibro Animal Health (PAHC - 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Perrigo has a Zacks Rank of #2 (Buy), while Phibro Animal Health has a Zacks Rank of #3 (Hold) right now. This means that PRGO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
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.
PRGO currently has a forward P/E ratio of 13.46, while PAHC has a forward P/E of 24.97. We also note that PRGO has a PEG ratio of 6.73. 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. PAHC currently has a PEG ratio of 7.76.
Another notable valuation metric for PRGO is its P/B ratio of 1.41. 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, PAHC has a P/B of 5.16.
Based on these metrics and many more, PRGO holds a Value grade of B, while PAHC has a Value grade of C.
PRGO has seen stronger estimate revision activity and sports more attractive valuation metrics than PAHC, so it seems like value investors will conclude that PRGO is the superior option right now.