PHG vs. RMD: Which Stock Should Value Investors Buy Now?
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Investors looking for stocks in the Medical - Products sector might want to consider either Royal Philips (PHG) or ResMed (RMD). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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 Royal Philips and ResMed are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture 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 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.
PHG currently has a forward P/E ratio of 19.96, while RMD has a forward P/E of 27.95. We also note that PHG has a PEG ratio of 1.04. 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. RMD currently has a PEG ratio of 2.05.
Another notable valuation metric for PHG is its P/B ratio of 2.32. 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, RMD has a P/B of 7.23.
Based on these metrics and many more, PHG holds a Value grade of A, while RMD has a Value grade of C.
Both PHG and RMD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PHG is the superior value option right now.
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Koninklijke Philips N.V. (PHG) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report