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

Zacks Equity Research

Investors interested in stocks from the Medical - Products sector have probably already heard of NuVasive (NUVA) and ResMed (RMD). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

NuVasive has a Zacks Rank of #2 (Buy), while ResMed 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 NUVA has an improving earnings outlook. But this is only part of the picture for value investors.

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 32.41, while RMD has a forward P/E of 37.94. We also note that NUVA has a PEG ratio of 2.50. 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 2.72.

Another notable valuation metric for NUVA is its P/B ratio of 4.57. 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, RMD has a P/B of 10.58.

These are just a few of the metrics contributing to NUVA's Value grade of B and RMD's Value grade of D.

NUVA has seen stronger estimate revision activity and sports more attractive valuation metrics than RMD, so it seems like value investors will conclude that NUVA is the superior 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