COLL vs. DSNKY: Which Stock Is the Better Value Option?

Investors interested in Medical - Drugs stocks are likely familiar with Collegium Pharmaceutical (COLL) and Daiichi Sankyo Co., Ltd. - Sponsored ADR (DSNKY). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Collegium Pharmaceutical has a Zacks Rank of #1 (Strong Buy), while Daiichi Sankyo Co., Ltd. - Sponsored ADR has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that COLL has an improving earnings outlook. 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.

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.

COLL currently has a forward P/E ratio of 3.14, while DSNKY has a forward P/E of 18.47. We also note that COLL has a PEG ratio of 0.63. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DSNKY currently has a PEG ratio of 1.83.

Another notable valuation metric for COLL is its P/B ratio of 2.41. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, DSNKY has a P/B of 2.98.

These metrics, and several others, help COLL earn a Value grade of A, while DSNKY has been given a Value grade of C.

COLL sticks out from DSNKY in both our Zacks Rank and Style Scores models, so value investors will likely feel that COLL is the better option right now.

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

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