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NUVA vs. RMD: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Medical - Products stocks are likely familiar with NuVasive (NUVA) and 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.

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.

NuVasive and ResMed are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NUVA is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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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.

NUVA currently has a forward P/E ratio of 28.34, while RMD has a forward P/E of 32.39. We also note that NUVA has a PEG ratio of 2.22. 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. RMD currently has a PEG ratio of 3.06.

Another notable valuation metric for NUVA is its P/B ratio of 3.96. 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. By comparison, RMD has a P/B of 8.78.

Based on these metrics and many more, NUVA holds a Value grade of B, while RMD has a Value grade of D.

NUVA 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 NUVA is likely the superior value option right now.


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NuVasive, Inc. (NUVA) : Free Stock Analysis Report
 
ResMed Inc. (RMD) : Free Stock Analysis Report
 
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Zacks Investment Research