HQY vs. MEDP: Which Stock Is the Better Value Option?

Investors interested in stocks from the Medical Services sector have probably already heard of HealthEquity HQY and Medpace MEDP. But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

HealthEquity has a Zacks Rank of #2 (Buy), while Medpace has a Zacks Rank of #3 (Hold) right now. This means that HQY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

HQY currently has a forward P/E ratio of 24.80, while MEDP has a forward P/E of 29.12. We also note that HQY has a PEG ratio of 0.88. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MEDP currently has a PEG ratio of 1.76.

Another notable valuation metric for HQY is its P/B ratio of 3.09. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MEDP has a P/B of 13.78.

These metrics, and several others, help HQY earn a Value grade of B, while MEDP has been given a Value grade of C.

HQY 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 HQY is likely the superior value option right now.

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