Investors looking for stocks in the Medical - Generic Drugs sector might want to consider either Akorn (AKRX) or Amphastar Pharmaceuticals (AMPH). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Akorn is sporting a Zacks Rank of #2 (Buy), while Amphastar Pharmaceuticals has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that AKRX likely has seen a stronger improvement to its earnings outlook than AMPH has recently. But this is only part of the picture for value investors.
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.
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.
AKRX currently has a forward P/E ratio of 52.52, while AMPH has a forward P/E of 184.82. We also note that AKRX has a PEG ratio of 2.28. 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. AMPH currently has a PEG ratio of 8.21.
Another notable valuation metric for AKRX is its P/B ratio of 2.53. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, AMPH has a P/B of 2.60.
Based on these metrics and many more, AKRX holds a Value grade of B, while AMPH has a Value grade of C.
AKRX sticks out from AMPH in both our Zacks Rank and Style Scores models, so value investors will likely feel that AKRX is the better option right now.
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