Investors interested in stocks from the Large Cap Pharmaceuticals sector have probably already heard of Sanofi (SNY) and Novo Nordisk (NVO). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Sanofi and Novo Nordisk are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SNY 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.
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.
SNY currently has a forward P/E ratio of 14.19, while NVO has a forward P/E of 23.43. We also note that SNY has a PEG ratio of 1.96. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NVO currently has a PEG ratio of 2.22.
Another notable valuation metric for SNY is its P/B ratio of 1.85. 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, NVO has a P/B of 17.29.
Based on these metrics and many more, SNY holds a Value grade of A, while NVO has a Value grade of C.
SNY has seen stronger estimate revision activity and sports more attractive valuation metrics than NVO, so it seems like value investors will conclude that SNY is the superior option right now.
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Sanofi (SNY) : Free Stock Analysis Report
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
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