U.S. Markets close in 1 hr 18 mins

PFE vs. NVO: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Pfizer (PFE) 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.

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.

Pfizer and Novo Nordisk are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PFE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

PFE currently has a forward P/E ratio of 12.92, while NVO has a forward P/E of 21.52. We also note that PFE has a PEG ratio of 2.15. 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 2.19.

Another notable valuation metric for PFE is its P/B ratio of 3.37. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NVO has a P/B of 16.02.

Based on these metrics and many more, PFE holds a Value grade of B, while NVO has a Value grade of C.

PFE 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 PFE is likely the superior value option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research