Investors looking for stocks in the Medical - Products sector might want to consider either Hill-Rom (HRC) or Abbott (ABT). 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.
Right now, Hill-Rom is sporting a Zacks Rank of #2 (Buy), while Abbott has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HRC has an improving earnings outlook. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
HRC currently has a forward P/E ratio of 15.56, while ABT has a forward P/E of 19.37. We also note that HRC has a PEG ratio of 1.40. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ABT currently has a PEG ratio of 1.83.
Another notable valuation metric for HRC is its P/B ratio of 3.57. 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, ABT has a P/B of 3.94.
These metrics, and several others, help HRC earn a Value grade of B, while ABT has been given a Value grade of C.
HRC 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 HRC is likely the superior value option right now.