PRGO vs. NEOG: Which Stock Is the Better Value Option?

Investors with an interest in Medical - Products stocks have likely encountered both Perrigo (PRGO) and Neogen (NEOG). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Perrigo has a Zacks Rank of #2 (Buy), while Neogen 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 PRGO has an improving earnings outlook. But this is just one piece of the puzzle 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.

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.

PRGO currently has a forward P/E ratio of 5.94, while NEOG has a forward P/E of 40.96. We also note that PRGO has a PEG ratio of 1.48. 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. NEOG currently has a PEG ratio of 4.10.

Another notable valuation metric for PRGO is its P/B ratio of 0.71. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NEOG has a P/B of 1.19.

Based on these metrics and many more, PRGO holds a Value grade of A, while NEOG has a Value grade of C.

PRGO stands above NEOG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PRGO is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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