Investors interested in stocks from the Medical - Drugs sector have probably already heard of Neurocrine Biosciences (NBIX) 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Neurocrine Biosciences and Sandoz Group AG Sponsored ADR are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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.
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.
NBIX currently has a forward P/E ratio of 15.55, while SDZNY has a forward P/E of 20.49. We also note that NBIX has a PEG ratio of 0.53. 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. SDZNY currently has a PEG ratio of 1.69.
Another notable valuation metric for NBIX is its P/B ratio of 3.89. 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, SDZNY has a P/B of 3.98.
These are just a few of the metrics contributing to NBIX's Value grade of B and SDZNY's Value grade of C.
Both NBIX and SDZNY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NBIX is the superior value option right now.
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Neurocrine Biosciences, Inc. (NBIX): Free Stock Analysis Report
Sandoz Group AG Sponsored ADR (SDZNY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).