Investors interested in Medical – Biomedical and Genetics stocks are likely familiar with Bristol Myers Squibb (BMY) and Horizon Therapeutics (HZNP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Bristol Myers Squibb and Horizon Therapeutics are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BMY has an improving earnings outlook. But this is only part of the picture for value investors.
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.
BMY currently has a forward P/E ratio of 9.49, while HZNP has a forward P/E of 31.43. We also note that BMY has a PEG ratio of 1.12. 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. HZNP currently has a PEG ratio of 1.73.
Another notable valuation metric for BMY is its P/B ratio of 2.66. 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, HZNP has a P/B of 5.32.
These metrics, and several others, help BMY earn a Value grade of A, while HZNP has been given a Value grade of C.
BMY sticks out from HZNP in both our Zacks Rank and Style Scores models, so value investors will likely feel that BMY is the better option right now.
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