Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Regeneron Pharmaceuticals, Inc. REGN stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Regeneron Pharmaceuticals has a trailing twelve months PE ratio of 15.20, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 17.75. If we focus on the stock’s long-term PE trend, the current level puts Regeneron Pharmaceuticals’ current PE ratio way below its midpoint (which is 46.22) over the past five years.
Further, the stock’s PE also compares favorably with the Zacks Medical sector’s trailing twelve months PE ratio, which stands at 19.98. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Regeneron Pharmaceuticals has a forward PE ratio (price relative to this year’s earnings) of just 12.72, so it is fair to say that a slightly more value-oriented path may be ahead for Regeneron Pharmaceuticals’ stock in the near term too.
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate). The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Regeneron Pharmaceuticals’ PEG ratio stands at just 1.08, compared with the Zacks Medical – Biomedical and Genetics industry average of 3.79. This suggests an undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Regeneron Pharmaceuticals currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes REGN a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 13.32, which is slightly better than the industry average of 14.40. Clearly, REGN is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Regeneron Pharmaceuticals might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of D and a Momentum score of D. This gives REGN a VGM score—or its overarching fundamental grade—of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen seven estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen nine upward and one downward revision in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has risen 12.2% in the past two months, while the full year estimate has increased 6.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Regeneron Pharmaceuticals, Inc. Price and Consensus
Regeneron Pharmaceuticals, Inc. price-consensus-chart | Regeneron Pharmaceuticals, Inc. Quote
The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Regeneron Pharmaceuticals is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.
Regeneron Pharmaceuticals is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (top 33% out of more than 250 industries) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
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
Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research