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Investors with an interest in Medical - Drugs stocks have likely encountered both United Therapeutics (UTHR) and Catalent (CTLT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, United Therapeutics has a Zacks Rank of #2 (Buy), while Catalent has a Zacks Rank of #5 (Strong Sell). This means that UTHR's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

UTHR currently has a forward P/E ratio of 12.93, while CTLT has a forward P/E of 49.05. We also note that UTHR has a PEG ratio of 1.40. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CTLT currently has a PEG ratio of 1.68.

Another notable valuation metric for UTHR is its P/B ratio of 2.67. 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, CTLT has a P/B of 2.89.

Based on these metrics and many more, UTHR holds a Value grade of B, while CTLT has a Value grade of D.

UTHR has seen stronger estimate revision activity and sports more attractive valuation metrics than CTLT, so it seems like value investors will conclude that UTHR is the superior option right now.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.