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Is Mallinckrodt (MNK) Stock Undervalued Right Now?

Zacks Equity Research
Edwards Lifesciences (EW) delivered earnings and revenue surprises of 3.76% and 4.00%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 company value investors might notice is Mallinckrodt (MNK). MNK is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 2.93, while its industry has an average P/E of 8.69. Over the last 12 months, MNK's Forward P/E has been as high as 5.01 and as low as 1.87, with a median of 2.92.

Investors should also recognize that MNK has a P/B ratio of 0.68. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. MNK's current P/B looks attractive when compared to its industry's average P/B of 1.12. MNK's P/B has been as high as 0.72 and as low as 0.16, with a median of 0.32, over the past year.

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


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