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Should Value Investors Buy AbbVie (ABBV) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is AbbVie (ABBV). ABBV is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 8.44. This compares to its industry's average Forward P/E of 14.81. Over the past year, ABBV's Forward P/E has been as high as 11.61 and as low as 6.78, with a median of 8.86.

We also note that ABBV holds a PEG ratio of 1.53. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ABBV's PEG compares to its industry's average PEG of 1.77. Over the last 12 months, ABBV's PEG has been as high as 1.69 and as low as 0.67, with a median of 1.36.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ABBV has a P/S ratio of 3.61. This compares to its industry's average P/S of 4.

These figures are just a handful of the metrics value investors tend to look at, but they help show that AbbVie is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ABBV feels like a great value stock at the moment.


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