Investors interested in stocks from the Large Cap Pharmaceuticals sector have probably already heard of Bristol-Myers Squibb (BMY) and Astrazeneca (AZN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Bristol-Myers Squibb is sporting a Zacks Rank of #2 (Buy), while Astrazeneca has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BMY is likely seeing its earnings outlook improve to a greater extent. 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.
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.
BMY currently has a forward P/E ratio of 10.95, while AZN has a forward P/E of 24.20. We also note that BMY has a PEG ratio of 1.11. 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. AZN currently has a PEG ratio of 1.50.
Another notable valuation metric for BMY is its P/B ratio of 5.81. 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, AZN has a P/B of 9.67.
These are just a few of the metrics contributing to BMY's Value grade of A and AZN's Value grade of C.
BMY has seen stronger estimate revision activity and sports more attractive valuation metrics than AZN, so it seems like value investors will conclude that BMY is the superior option right now.
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Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
AstraZeneca PLC (AZN) : Free Stock Analysis Report
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