Investors interested in stocks from the Medical - Dental Supplies sector have probably already heard of Becton Dickinson (BDX) and West Pharmaceutical Services (WST). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Becton Dickinson and West Pharmaceutical Services are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BDX has an improving earnings outlook. However, value investors will care about much more than just this.
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.
BDX currently has a forward P/E ratio of 19.82, while WST has a forward P/E of 46.07. We also note that BDX has a PEG ratio of 2.55. 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. WST currently has a PEG ratio of 3.06.
Another notable valuation metric for BDX is its P/B ratio of 2.69. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WST has a P/B of 9.38.
These metrics, and several others, help BDX earn a Value grade of B, while WST has been given a Value grade of C.
BDX has seen stronger estimate revision activity and sports more attractive valuation metrics than WST, so it seems like value investors will conclude that BDX is the superior option right now.
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