Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either Regeneron (REGN) or Illumina (ILMN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Regeneron has a Zacks Rank of #2 (Buy), while Illumina has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that REGN has an improving earnings outlook. But this is only part of the picture 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
REGN currently has a forward P/E ratio of 17.49, while ILMN has a forward P/E of 24.94. We also note that REGN has a PEG ratio of 1.64. 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 2.45.
Another notable valuation metric for REGN is its P/B ratio of 2.62. 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, ILMN has a P/B of 7.18.
These metrics, and several others, help REGN earn a Value grade of B, while ILMN has been given a Value grade of C.
REGN sticks out from ILMN in both our Zacks Rank and Style Scores models, so value investors will likely feel that REGN is the better option right now.
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Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report
Illumina, Inc. (ILMN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).