Investors looking for stocks in the Medical - Dental Supplies sector might want to consider either Dentsply International (XRAY) or The Cooper Companies (COO). 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.
Dentsply International has a Zacks Rank of #2 (Buy), while The Cooper Companies has a Zacks Rank of #3 (Hold) right now. This means that XRAY'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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
XRAY currently has a forward P/E ratio of 21.12, while COO has a forward P/E of 30.34. We also note that XRAY has a PEG ratio of 2.31. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. COO currently has a PEG ratio of 2.76.
Another notable valuation metric for XRAY is its P/B ratio of 2.35. 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, COO has a P/B of 2.60.
These metrics, and several others, help XRAY earn a Value grade of B, while COO has been given a Value grade of C.
XRAY has seen stronger estimate revision activity and sports more attractive valuation metrics than COO, so it seems like value investors will conclude that XRAY is the superior option right now.
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