Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either Patterson Cos. (PDCO) or Merit Medical (MMSI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, both Patterson Cos. and Merit Medical are holding a Zacks Rank of # 2 (Buy). 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. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PDCO currently has a forward P/E ratio of 16.32, while MMSI has a forward P/E of 25.70. We also note that PDCO has a PEG ratio of 2.53. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MMSI currently has a PEG ratio of 3.05.
Another notable valuation metric for PDCO is its P/B ratio of 1.52. 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, MMSI has a P/B of 2.34.
Based on these metrics and many more, PDCO holds a Value grade of A, while MMSI has a Value grade of C.
Both PDCO and MMSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PDCO is the superior value option right now.