GDRX vs. HQY: Which Stock Is the Better Value Option?
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.
Currently, GoodRx Holdings, Inc. has a Zacks Rank of #2 (Buy), while HealthEquity 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 GDRX has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
GDRX currently has a forward P/E ratio of 12.80, while HQY has a forward P/E of 27.57. We also note that GDRX has a PEG ratio of 1.15. 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. HQY currently has a PEG ratio of 1.32.
Another notable valuation metric for GDRX is its P/B ratio of 2.64. 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, HQY has a P/B of 4.2.
These metrics, and several others, help GDRX earn a Value grade of B, while HQY has been given a Value grade of D.
GDRX stands above HQY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GDRX is the superior value option right now.
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HealthEquity, Inc. (HQY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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