ALKS or ILMN: Which Is the Better Value Stock Right Now?

Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with Alkermes (ALKS) and Illumina (ILMN). 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.

Currently, Alkermes has a Zacks Rank of #1 (Strong Buy), while Illumina has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALKS is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

ALKS currently has a forward P/E ratio of 16.69, while ILMN has a forward P/E of 25.86. We also note that ALKS has a PEG ratio of 1.36. 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. ILMN currently has a PEG ratio of 2.62.

Another notable valuation metric for ALKS is its P/B ratio of 3.11. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ILMN has a P/B of 7.81.

These metrics, and several others, help ALKS earn a Value grade of B, while ILMN has been given a Value grade of C.

ALKS 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 ALKS is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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