Investors interested in stocks from the Medical - Products sector have probably already heard of Baxter International (BAX) and Stryker (SYK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Baxter International and Stryker are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.
BAX currently has a forward P/E ratio of 16.32, while SYK has a forward P/E of 29.92. We also note that BAX has a PEG ratio of 2.91. 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. SYK currently has a PEG ratio of 3.08.
Another notable valuation metric for BAX is its P/B ratio of 4.03. 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, SYK has a P/B of 6.83.
These metrics, and several others, help BAX earn a Value grade of B, while SYK has been given a Value grade of C.
Both BAX and SYK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BAX is the superior value option right now.
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