Investors interested in stocks from the Medical Services sector have probably already heard of Solventum (SOLV) and HealthEquity (HQY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Solventum has a Zacks Rank of #2 (Buy), while HealthEquity 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 SOLV has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
SOLV currently has a forward P/E ratio of 10.05, while HQY has a forward P/E of 18.24. We also note that SOLV has a PEG ratio of 1.07. 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. HQY currently has a PEG ratio of 1.27.
Another notable valuation metric for SOLV is its P/B ratio of 2.22. 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, HQY has a P/B of 3.4.
These metrics, and several others, help SOLV earn a Value grade of A, while HQY has been given a Value grade of C.
SOLV has seen stronger estimate revision activity and sports more attractive valuation metrics than HQY, so it seems like value investors will conclude that SOLV is the superior option right now.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X $TWTR Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Solventum Corporation (SOLV): Free Stock Analysis Report
HealthEquity, Inc. (HQY): Free Stock Analysis Report