Investors interested in Medical - Drugs stocks are likely familiar with United Therapeutics (UTHR) and Sandoz Group AG Sponsored ADR (SDZNY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, United Therapeutics is sporting a Zacks Rank of #2 (Buy), while Sandoz Group AG Sponsored ADR has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that UTHR likely has seen a stronger improvement to its earnings outlook than SDZNY has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
UTHR currently has a forward P/E ratio of 19.43, while SDZNY has a forward P/E of 19.87. We also note that UTHR has a PEG ratio of 1.73. 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. SDZNY currently has a PEG ratio of 1.74.
Another notable valuation metric for UTHR is its P/B ratio of 3.72. 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, SDZNY has a P/B of 3.82.
These metrics, and several others, help UTHR earn a Value grade of B, while SDZNY has been given a Value grade of C.
UTHR stands above SDZNY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UTHR is the superior value option right now.
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United Therapeutics Corporation (UTHR): Free Stock Analysis Report
Sandoz Group AG Sponsored ADR (SDZNY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).