TMO vs. SONVY: Which Stock Is the Better Value Option?

·2-min read

Investors with an interest in Medical - Instruments stocks have likely encountered both Thermo Fisher Scientific (TMO) and SONOVA HOLDING (SONVY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Currently, both Thermo Fisher Scientific and SONOVA HOLDING are holding a Zacks Rank of # 2 (Buy). 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. 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.

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.

TMO currently has a forward P/E ratio of 23.41, while SONVY has a forward P/E of 23.67. We also note that TMO has a PEG ratio of 1.87. 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. SONVY currently has a PEG ratio of 2.49.

Another notable valuation metric for TMO is its P/B ratio of 4.95. 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, SONVY has a P/B of 6.63.

Based on these metrics and many more, TMO holds a Value grade of B, while SONVY has a Value grade of C.

Both TMO and SONVY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TMO is the superior value option right now.

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