Investors looking for stocks in the Medical - Drugs sector might want to consider either Pacira (PCRX) or Zoetis (ZTS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Pacira has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PCRX has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
PCRX currently has a forward P/E ratio of 13.03, while ZTS has a forward P/E of 30.45. We also note that PCRX has a PEG ratio of 0.39. 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. ZTS currently has a PEG ratio of 2.69.
Another notable valuation metric for PCRX is its P/B ratio of 3.89. 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, ZTS has a P/B of 21.16.
These metrics, and several others, help PCRX earn a Value grade of B, while ZTS has been given a Value grade of D.
PCRX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PCRX is likely the superior value option right now.
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Pacira Pharmaceuticals, Inc. (PCRX) : Free Stock Analysis Report
Zoetis Inc. (ZTS) : Free Stock Analysis Report
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