Investors with an interest in Medical - Dental Supplies stocks have likely encountered both Merit Medical (MMSI) and Align Technology (ALGN). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Merit Medical has a Zacks Rank of #2 (Buy), while Align Technology has a Zacks Rank of #5 (Strong Sell). This means that MMSI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
MMSI currently has a forward P/E ratio of 28.22, while ALGN has a forward P/E of 28.64. We also note that MMSI has a PEG ratio of 2.57. 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. ALGN currently has a PEG ratio of 23.28.
Another notable valuation metric for MMSI is its P/B ratio of 3.79. 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, ALGN has a P/B of 4.27.
These are just a few of the metrics contributing to MMSI's Value grade of B and ALGN's Value grade of D.
MMSI 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 MMSI is likely the superior value option right now.
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