TMO Vs. EW: Which Stock Is The Better Value Option?

Investors looking for stocks in the Medical - Instruments sector might want to consider either Thermo Fisher Scientific (TMO) or Edwards Lifesciences (EW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, both Thermo Fisher Scientific and Edwards Lifesciences are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

TMO currently has a forward P/E ratio of 23.82, while EW has a forward P/E of 41.37. We also note that TMO has a PEG ratio of 1.91. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EW currently has a PEG ratio of 2.78.

Another notable valuation metric for TMO is its P/B ratio of 4. 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. For comparison, EW has a P/B of 12.48.

These metrics, and several others, help TMO earn a Value grade of B, while EW has been given a Value grade of C.

Both TMO and EW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TMO is the superior value option right now.