AZN vs. ILMN: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Astrazeneca (AZN) and Illumina (ILMN). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Astrazeneca and Illumina 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 AZN 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 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.

AZN currently has a forward P/E ratio of 18.43, while ILMN has a forward P/E of 33.85. We also note that AZN has a PEG ratio of 1.50. 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. ILMN currently has a PEG ratio of 3.30.

Another notable valuation metric for AZN is its P/B ratio of 6.21. 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, ILMN has a P/B of 9.94.

These are just a few of the metrics contributing to AZN's Value grade of B and ILMN's Value grade of C.

AZN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AZN is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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