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Investors interested in Medical Info Systems stocks are likely familiar with Nextgen Healthcare (NXGN) and HMS Holdings (HMSY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Nextgen Healthcare and HMS Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NXGN has an improving earnings 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
NXGN currently has a forward P/E ratio of 11.11, while HMSY has a forward P/E of 18.60. We also note that NXGN has a PEG ratio of 1.45. 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. HMSY currently has a PEG ratio of 1.55.
Another notable valuation metric for NXGN is its P/B ratio of 1.50. 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, HMSY has a P/B of 2.33.
Based on these metrics and many more, NXGN holds a Value grade of B, while HMSY has a Value grade of D.
NXGN sticks out from HMSY in both our Zacks Rank and Style Scores models, so value investors will likely feel that NXGN is the better option right now.
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