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Investors interested in stocks from the Medical - Instruments sector have probably already heard of Globus Medical (GMED) and SONOVA HOLDING (SONVY). 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 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, Globus Medical is sporting a Zacks Rank of #2 (Buy), while SONOVA HOLDING 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 GMED is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
GMED currently has a forward P/E ratio of 27.75, while SONVY has a forward P/E of 32.17. We also note that GMED has a PEG ratio of 1.97. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SONVY currently has a PEG ratio of 4.19.
Another notable valuation metric for GMED is its P/B ratio of 2.73. 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, SONVY has a P/B of 7.84.
Based on these metrics and many more, GMED holds a Value grade of B, while SONVY has a Value grade of D.
GMED stands above SONVY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GMED is the superior value option right now.
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