Investors interested in stocks from the Medical - Dental Supplies sector have probably already heard of Patterson Cos. (PDCO) and Align Technology (NASDAQ:ALGN). 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.
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.
Right now, both Patterson Cos. and Align Technology are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PDCO currently has a forward P/E ratio of 16.11, while ALGN has a forward P/E of 108.73. We also note that PDCO has a PEG ratio of 1.69. 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. ALGN currently has a PEG ratio of 5.95.
Another notable valuation metric for PDCO is its P/B ratio of 3.38. 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, ALGN has a P/B of 13.11.
Based on these metrics and many more, PDCO holds a Value grade of B, while ALGN has a Value grade of F.
Both PDCO and ALGN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PDCO is the superior value option right now.
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Patterson Companies, Inc. (NASDAQ:PDCO): Free Stock Analysis Report
Align Technology, Inc. (ALGN): Free Stock Analysis Report
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