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Are Investors Undervaluing Novartis (NVS) Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Novartis (NVS). NVS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.

Another valuation metric that we should highlight is NVS's P/B ratio of 4.16. 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. This company's current P/B looks solid when compared to its industry's average P/B of 6.93. NVS's P/B has been as high as 4.64 and as low as 2.43, with a median of 2.61, over the past year.

Finally, investors will want to recognize that NVS has a P/CF ratio of 11.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. NVS's P/CF compares to its industry's average P/CF of 15.36. Within the past 12 months, NVS's P/CF has been as high as 12.04 and as low as 9.17, with a median of 10.65.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Novartis is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, NVS feels like a great value stock at the moment.


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