Investors looking for stocks in the Medical - Products sector might want to consider either Medtronic (MDT) or Agilent Technologies (A). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.
Both Medtronic and Agilent Technologies have a Zacks Rank of #2 (Buy) right now. 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. But this is just one piece of the puzzle for value investors.
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.
MDT currently has a forward P/E ratio of 15.24, while A has a forward P/E of 24.61. We also note that MDT has a PEG ratio of 2.43. 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. A currently has a PEG ratio of 2.63.
Another notable valuation metric for MDT is its P/B ratio of 2.32. 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, A has a P/B of 5.89.
Based on these metrics and many more, MDT holds a Value grade of B, while A has a Value grade of C.
Both MDT and A are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MDT is the superior value option right now.
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