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Investors interested in Medical - Dental Supplies stocks are likely familiar with Patterson Cos. (PDCO) and Merit Medical (MMSI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Patterson Cos. has a Zacks Rank of #1 (Strong Buy), while Merit Medical has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PDCO likely has seen a stronger improvement to its earnings outlook than MMSI has recently. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
PDCO currently has a forward P/E ratio of 10.61, while MMSI has a forward P/E of 18.17. We also note that PDCO has a PEG ratio of 1.24. 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. MMSI currently has a PEG ratio of 1.64.
Another notable valuation metric for PDCO is its P/B ratio of 1.05. 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, MMSI has a P/B of 1.64.
Based on these metrics and many more, PDCO holds a Value grade of B, while MMSI has a Value grade of C.
PDCO stands above MMSI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PDCO is the superior value option right now.
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