Back to top

Image: Bigstock

HRC vs. ABT: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors interested in Medical - Products stocks are likely familiar with Hill-Rom (HRC - Free Report) and Abbott (ABT - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Hill-Rom has a Zacks Rank of #2 (Buy), while Abbott has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HRC 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 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.

HRC currently has a forward P/E ratio of 19.36, while ABT has a forward P/E of 33.08. We also note that HRC has a PEG ratio of 1.24. 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. ABT currently has a PEG ratio of 4.10.

Another notable valuation metric for HRC is its P/B ratio of 4.55. 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, ABT has a P/B of 5.41.

Based on these metrics and many more, HRC holds a Value grade of A, while ABT has a Value grade of D.

HRC has seen stronger estimate revision activity and sports more attractive valuation metrics than ABT, so it seems like value investors will conclude that HRC is the superior option right now.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

HillRom Holdings, Inc. (HRC) - free report >>

Abbott Laboratories (ABT) - free report >>

Published in