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TAK vs. ZTS: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors interested in Medical - Drugs stocks are likely familiar with Takeda Pharmaceutical Co. (TAK) and 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.

Currently, Takeda Pharmaceutical Co. has a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TAK likely has seen a stronger improvement to its earnings outlook than ZTS has recently. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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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.

TAK currently has a forward P/E ratio of 5.88, while ZTS has a forward P/E of 30.56. We also note that TAK has a PEG ratio of 0.54. 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 2.67.

Another notable valuation metric for TAK is its P/B ratio of 0.84. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 15.63.

Based on these metrics and many more, TAK holds a Value grade of A, while ZTS has a Value grade of C.

TAK has seen stronger estimate revision activity and sports more attractive valuation metrics than ZTS, so it seems like value investors will conclude that TAK is the superior option right now.


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Takeda Pharmaceutical Co. (TAK) : Free Stock Analysis Report
 
Zoetis Inc. (ZTS) : Free Stock Analysis Report
 
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Zacks Investment Research