Investors interested in Medical - Dental Supplies stocks are likely familiar with McKesson (MCK) and Cooper Cos. (COO). 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.
McKesson has a Zacks Rank of #2 (Buy), while Cooper Cos. has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that MCK likely has seen a stronger improvement to its earnings outlook than COO has recently. 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.
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.
MCK currently has a forward P/E ratio of 11.36, while COO has a forward P/E of 27.57. We also note that MCK has a PEG ratio of 1.61. 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. COO currently has a PEG ratio of 2.56.
Another notable valuation metric for MCK is its P/B ratio of 4.65. 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, COO has a P/B of 4.82.
Based on these metrics and many more, MCK holds a Value grade of A, while COO has a Value grade of D.
MCK sticks out from COO in both our Zacks Rank and Style Scores models, so value investors will likely feel that MCK is the better option right now.