Investors looking for stocks in the Medical - Drugs sector might want to consider either Grifols (GRFS) or Neurocrine Biosciences (NBIX). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Grifols and Neurocrine Biosciences are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that GRFS'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.
GRFS currently has a forward P/E ratio of 9.61, while NBIX has a forward P/E of 33.19. We also note that GRFS has a PEG ratio of 0.34. 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. NBIX currently has a PEG ratio of 1.05.
Another notable valuation metric for GRFS is its P/B ratio of 0.79. 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, NBIX has a P/B of 5.39.
These metrics, and several others, help GRFS earn a Value grade of A, while NBIX has been given a Value grade of C.
GRFS has seen stronger estimate revision activity and sports more attractive valuation metrics than NBIX, so it seems like value investors will conclude that GRFS is the superior option right now.
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Grifols, S.A. (GRFS): Free Stock Analysis Report Neurocrine Biosciences, Inc. (NBIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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