Investors interested in stocks from the Medical – Drugs sector have probably already heard of Assertio (ASRT) and Zoetis (ZTS). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to 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 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.
Right now, Assertio is sporting a Zacks Rank of #1 (Strong Buy), while Zoetis has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ASRT is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
ASRT currently has a forward P/E ratio of 7.07, while ZTS has a forward P/E of 33.60. We also note that ASRT has a PEG ratio of 0.71. 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. ZTS currently has a PEG ratio of 2.85.
Another notable valuation metric for ASRT is its P/B ratio of 1.15. 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, ZTS has a P/B of 17.19.
These are just a few of the metrics contributing to ASRT’s Value grade of A and ZTS’s Value grade of C.
ASRT has seen stronger estimate revision activity and sports more attractive valuation metrics than ZTS, so it seems like value investors will conclude that ASRT is the superior option right now.
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