Investors with an interest in Medical - Drugs stocks have likely encountered both Shionogi & Co., Ltd. Unsponsored ADR (SGIOY) and United Therapeutics (UTHR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Shionogi & Co., Ltd. Unsponsored ADR and United Therapeutics are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SGIOY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
SGIOY currently has a forward P/E ratio of 10.68, while UTHR has a forward P/E of 20.59. We also note that SGIOY has a PEG ratio of 3.16. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. UTHR currently has a PEG ratio of 3.89.
Another notable valuation metric for SGIOY is its P/B ratio of 1.34. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, UTHR has a P/B of 3.64.
These are just a few of the metrics contributing to SGIOY's Value grade of A and UTHR's Value grade of C.
SGIOY stands above UTHR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SGIOY is the superior value option right now.
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Shionogi & Co., Ltd. Unsponsored ADR (SGIOY): Free Stock Analysis Report
United Therapeutics Corporation (UTHR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).