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TAK vs. ZTS: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors interested in Medical - Drugs stocks are likely familiar with Takeda Pharmaceutical Co. (TAK) and Zoetis (ZTS). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Takeda Pharmaceutical Co. has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #4 (Sell). This means that TAK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

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.

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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.

TAK currently has a forward P/E ratio of 6.21, while ZTS has a forward P/E of 35.52. We also note that TAK has a PEG ratio of 0.56. 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. ZTS currently has a PEG ratio of 3.03.

Another notable valuation metric for TAK is its P/B ratio of 0.91. 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, ZTS has a P/B of 18.07.

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

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


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Takeda Pharmaceutical Co. (TAK) : Free Stock Analysis Report
 
Zoetis Inc. (ZTS) : Free Stock Analysis Report
 
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Zacks Investment Research