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NVS vs. NVO: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Novartis (NVS) and Novo Nordisk (NVO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Novartis has a Zacks Rank of #2 (Buy), while Novo Nordisk 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 NVS is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

NVS currently has a forward P/E ratio of 17.54, while NVO has a forward P/E of 20.34. We also note that NVS has a PEG ratio of 2.02. 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. NVO currently has a PEG ratio of 2.27.

Another notable valuation metric for NVS is its P/B ratio of 3.96. 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, NVO has a P/B of 16.83.

These metrics, and several others, help NVS earn a Value grade of A, while NVO has been given a Value grade of C.

NVS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NVS is likely the superior value option right now.


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Novartis AG (NVS) : Free Stock Analysis Report
 
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
 
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