Investors interested in Medical – Biomedical and Genetics stocks are likely familiar with Ligand Pharmaceuticals (LGND) and Alkermes (ALKS). But which of these two stocks presents investors with the better value opportunity right now? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ligand Pharmaceuticals has a Zacks Rank of #2 (Buy), while Alkermes 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 LGND has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
LGND currently has a forward P/E ratio of 23.88, while ALKS has a forward P/E of 195.64. We also note that LGND has a PEG ratio of 1.59. 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. ALKS currently has a PEG ratio of 73.27.
Another notable valuation metric for LGND is its P/B ratio of 2.29. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. By comparison, ALKS has a P/B of 2.43.
These are just a few of the metrics contributing to LGND’s Value grade of B and ALKS’s Value grade of C.
LGND has seen stronger estimate revision activity and sports more attractive valuation metrics than ALKS, so it seems like value investors will conclude that LGND is the superior option right now.
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