Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with Regeneron (REGN) 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 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.
Regeneron has a Zacks Rank of #1 (Strong Buy), while Illumina has a Zacks Rank of #2 (Buy) right now. 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. However, value investors will care about much more than just this.
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.
REGN currently has a forward P/E ratio of 14.16, while ILMN has a forward P/E of 50.77. We also note that REGN has a PEG ratio of 1.23. 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. ILMN currently has a PEG ratio of 3.85.
Another notable valuation metric for REGN is its P/B ratio of 2.44. 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, ILMN has a P/B of 14.47.
These are just a few of the metrics contributing to REGN's Value grade of B and ILMN's Value grade of D.
REGN has seen stronger estimate revision activity and sports more attractive valuation metrics than ILMN, so it seems like value investors will conclude that REGN is the superior 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).