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

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Investors interested in Medical - Drugs stocks are likely familiar with Jazz Pharmaceuticals (JAZZ - Free Report) and Zoetis (ZTS - Free Report) . 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Jazz Pharmaceuticals has a Zacks Rank of #1 (Strong Buy), while Zoetis has a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that JAZZ has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

JAZZ currently has a forward P/E ratio of 9.45, while ZTS has a forward P/E of 33.85. We also note that JAZZ has a PEG ratio of 1.05. 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 2.79.

Another notable valuation metric for JAZZ is its P/B ratio of 2.77. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ZTS has a P/B of 21.74.

These are just a few of the metrics contributing to JAZZ's Value grade of A and ZTS's Value grade of C.

JAZZ is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that JAZZ is likely the superior value option right now.


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