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TAK or ZTS: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 min read

Investors interested in stocks from the Medical - Drugs sector have probably already heard of Takeda Pharmaceutical Co. (TAK) and Zoetis (ZTS). 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Takeda Pharmaceutical Co. is sporting a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TAK has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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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.

TAK currently has a forward P/E ratio of 6.04, while ZTS has a forward P/E of 31.36. We also note that TAK has a PEG ratio of 0.56. 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 2.74.

Another notable valuation metric for TAK is its P/B ratio of 0.87. 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, ZTS has a P/B of 16.05.

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

TAK sticks out from ZTS in both our Zacks Rank and Style Scores models, so value investors will likely feel that TAK is the better option right now.


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Takeda Pharmaceutical Co. (TAK) : Free Stock Analysis Report
 
Zoetis Inc. (ZTS) : Free Stock Analysis Report
 
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Zacks Investment Research