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MNK vs. AMPH: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors with an interest in Medical - Generic Drugs stocks have likely encountered both Mallinckrodt (MNK) and Amphastar Pharmaceuticals (AMPH). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Mallinckrodt is sporting a Zacks Rank of #1 (Strong Buy), while Amphastar Pharmaceuticals has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MNK has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

MNK currently has a forward P/E ratio of 2.89, while AMPH has a forward P/E of 31.77. We also note that MNK has a PEG ratio of 0.24. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AMPH currently has a PEG ratio of 1.27.

Another notable valuation metric for MNK is its P/B ratio of 0.27. 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 3.04.

These are just a few of the metrics contributing to MNK's Value grade of A and AMPH's Value grade of C.

MNK stands above AMPH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MNK is the superior value option right now.


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