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CAH vs. ALGN: Which Stock Should Value Investors Buy Now?


Investors interested in stocks from the Medical – Dental Supplies sector have probably already heard of Cardinal Health (CAH) and Align Technology (ALGN). But which of these two stocks presents investors with the better value opportunity right now? Let’s 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.

Cardinal Health has a Zacks Rank of #2 (Buy), while Align Technology has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that CAH likely has seen a stronger improvement to its earnings outlook than ALGN has recently. But this is only part of the picture for value investors.

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.

CAH currently has a forward P/E ratio of 9.66, while ALGN has a forward P/E of 47.88. We also note that CAH has a PEG ratio of 1.55. 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. ALGN currently has a PEG ratio of 2.22.

Another notable valuation metric for CAH is its P/B ratio of 2.41. 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, ALGN has a P/B of 15.54.

Based on these metrics and many more, CAH holds a Value grade of A, while ALGN has a Value grade of D.

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

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