Are These Medical Stocks Undervalued Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to...
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is Laboratory Corp. of America (LH). LH is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 16.88 right now. For comparison, its industry sports an average P/E of 19.50. Over the past year, LH's Forward P/E has been as high as 17.62 and as low as 10.90, with a median of 13.92.
We also note that LH holds a PEG ratio of 1.60. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LH's PEG compares to its industry's average PEG of 1.84. Over the past 52 weeks, LH's PEG has been as high as 1.67 and as low as 1.07, with a median of 1.32.
Another notable valuation metric for LH is its P/B ratio of 2.77. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. LH's current P/B looks attractive when compared to its industry's average P/B of 6.19. Over the past 12 months, LH's P/B has been as high as 2.94 and as low as 2.12, with a median of 2.60.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. LH has a P/S ratio of 1.75. This compares to its industry's average P/S of 1.97.
If you're looking for another solid Medical - Dental Supplies value stock, take a look at McKesson (MCK). MCK is a # 2 (Buy) stock with a Value score of A.
Shares of McKesson currently holds a Forward P/E ratio of 10.88, and its PEG ratio is 1.20. In comparison, its industry sports average P/E and PEG ratios of 19.50 and 1.84.
MCK's price-to-earnings ratio has been as high as 11.27 and as low as 9.17, with a median of 10.04, while its PEG ratio has been as high as 1.73 and as low as 1.09, with a median of 1.39, all within the past year.
Furthermore, McKesson holds a P/B ratio of -422.56 and its industry's price-to-book ratio is 6.19. MCK's P/B has been as high as 184.34, as low as -717.21, with a median of -110.01 over the past 12 months.
Value investors will likely look at more than just these metrics, but the above data helps show that Laboratory Corp. of America and McKesson are likely undervalued currently. And when considering the strength of its earnings outlook, LH and MCK sticks out as one of the market's strongest value stocks.
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Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
McKesson Corporation (MCK): Free Stock Analysis Report
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