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Should Value Investors Buy These Medical Stocks?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is Henry Schein (HSIC). HSIC is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 16.63, while its industry has an average P/E of 18.63. HSIC's Forward P/E has been as high as 21.02 and as low as 15.13, with a median of 17.82, all within the past year.

Investors should also note that HSIC holds a PEG ratio of 1.41. 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. HSIC's industry currently sports an average PEG of 1.77. Over the past 52 weeks, HSIC's PEG has been as high as 3.07 and as low as 1.17, with a median of 1.62.

Investors should also recognize that HSIC has a P/B ratio of 2.63. 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. This stock's P/B looks solid versus its industry's average P/B of 5.94. Within the past 52 weeks, HSIC's P/B has been as high as 2.92 and as low as 2.20, with a median of 2.63.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. HSIC has a P/S ratio of 0.86. This compares to its industry's average P/S of 1.98.

Finally, investors will want to recognize that HSIC has a P/CF ratio of 13.34. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. HSIC's current P/CF looks attractive when compared to its industry's average P/CF of 49.73. HSIC's P/CF has been as high as 19.02 and as low as 12.07, with a median of 13.97, all within the past year.

Another great Medical - Dental Supplies stock you could consider is McKesson (MCK), which is a # 2 (Buy) stock with a Value Score of A.

McKesson is currently trading with a Forward P/E ratio of 11.56 while its PEG ratio sits at 1. Both of the company's metrics compare favorably to its industry's average P/E of 18.63 and average PEG ratio of 1.77.

Over the past year, MCK's P/E has been as high as 11.56, as low as 9.17, with a median of 10.05; its PEG ratio has been as high as 1.73, as low as 1, with a median of 1.62 during the same time period.

Furthermore, McKesson holds a P/B ratio of -450.18 and its industry's price-to-book ratio is 5.94. MCK's P/B has been as high as 184.34, as low as -717.21, with a median of -356.31 over the past 12 months.

These are only a few of the key metrics included in Henry Schein and McKesson strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, HSIC and MCK look like an impressive value stock at the moment.


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