Investors with an interest in Medical Services stocks have likely encountered both Pediatrix Medical Group (MD – Free Report) and Avantor, Inc. (AVTR – Free Report) . 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Pediatrix Medical Group has a Zacks Rank of #2 (Buy), while Avantor, Inc. has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MD is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
MD currently has a forward P/E ratio of 10.12, while AVTR has a forward P/E of 21.90. We also note that MD has a PEG ratio of 1.41. 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. AVTR currently has a PEG ratio of 3.88.
Another notable valuation metric for MD is its P/B ratio of 1.60. 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, AVTR has a P/B of 2.63.
These are just a few of the metrics contributing to MD’s Value grade of A and AVTR’s Value grade of C.
MD has seen stronger estimate revision activity and sports more attractive valuation metrics than AVTR, so it seems like value investors will conclude that MD is the superior option right now.
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