GRFS or SDZNY: Which Is the Better Value Stock Right Now?

Investors interested in Medical - Drugs stocks are likely familiar with Grifols (GRFS) and Sandoz Group AG Sponsored ADR (SDZNY). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Grifols has a Zacks Rank of #2 (Buy), while Sandoz Group AG Sponsored ADR has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that GRFS likely has seen a stronger improvement to its earnings outlook than SDZNY has recently. But this is just one factor that value investors are interested in.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

GRFS currently has a forward P/E ratio of 7.03, while SDZNY has a forward P/E of 20.54. We also note that GRFS has a PEG ratio of 0.28. 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. SDZNY currently has a PEG ratio of 1.77.

Another notable valuation metric for GRFS is its P/B ratio of 0.57. 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, SDZNY has a P/B of 3.95.

These metrics, and several others, help GRFS earn a Value grade of A, while SDZNY has been given a Value grade of C.

GRFS stands above SDZNY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GRFS is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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