Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either AmerisourceBergen (ABC) or Align Technology (ALGN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, AmerisourceBergen has a Zacks Rank of #2 (Buy), while Align Technology has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ABC is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ABC currently has a forward P/E ratio of 11.33, while ALGN has a forward P/E of 34.11. We also note that ABC has a PEG ratio of 1.53. 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. ALGN currently has a PEG ratio of 1.59.
Another notable valuation metric for ABC is its P/B ratio of 5.84. 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 13.48.
These metrics, and several others, help ABC earn a Value grade of A, while ALGN has been given a Value grade of D.
ABC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ABC is likely the superior value option right now.