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GILD vs. ILMN: Which Stock Is the Better Value Option?

Zacks Equity Research
Tractor Supply (TSCO) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either Gilead Sciences (GILD) or Illumina (ILMN). 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 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.

Right now, both Gilead Sciences and Illumina are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.

GILD currently has a forward P/E ratio of 9.72, while ILMN has a forward P/E of 51.09. We also note that GILD has a PEG ratio of 0.61. 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. ILMN currently has a PEG ratio of 2.38.

Another notable valuation metric for GILD is its P/B ratio of 3.87. 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, ILMN has a P/B of 12.33.

These metrics, and several others, help GILD earn a Value grade of A, while ILMN has been given a Value grade of D.

Both GILD and ILMN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GILD is the superior value option right now.


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