Investors with an interest in Medical – Biomedical and Genetics stocks have likely encountered both Incyte (INCY) and Techne (TECH). 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 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, both Incyte and Techne are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
INCY currently has a forward P/E ratio of 27.23, while TECH has a forward P/E of 38.27. We also note that INCY has a PEG ratio of 0.76. 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. TECH currently has a PEG ratio of 1.47.
Another notable valuation metric for INCY is its P/B ratio of 4.67. 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, TECH has a P/B of 8.03.
Based on these metrics and many more, INCY holds a Value grade of B, while TECH has a Value grade of C.
Both INCY and TECH are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that INCY is the superior value option right now.
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