HOLX vs. EW: Which Stock Is the Better Value Option?
Investors interested in Medical - Instruments stocks are likely familiar with Hologic (HOLX) and Edwards Lifesciences (EW). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Hologic has a Zacks Rank of #2 (Buy), while Edwards Lifesciences has a Zacks Rank of #3 (Hold) right now. This means that HOLX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
HOLX currently has a forward P/E ratio of 22.83, while EW has a forward P/E of 31.79. We also note that HOLX has a PEG ratio of 1.50. 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. EW currently has a PEG ratio of 2.75.
Another notable valuation metric for HOLX is its P/B ratio of 4.08. 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, EW has a P/B of 7.88.
These are just a few of the metrics contributing to HOLX's Value grade of A and EW's Value grade of C.
HOLX stands above EW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HOLX is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Hologic, Inc. (HOLX) : Free Stock Analysis Report
Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report
To read this article on Zacks.com click here.