Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Regeneron (REGN) and Illumina (ILMN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Regeneron and Illumina are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that REGN has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
REGN currently has a forward P/E ratio of 17.76, while ILMN has a forward P/E of 28.03. We also note that REGN has a PEG ratio of 1.77. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ILMN currently has a PEG ratio of 2.36.
Another notable valuation metric for REGN is its P/B ratio of 2.59. 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 9.07.
These are just a few of the metrics contributing to REGN's Value grade of B and ILMN's Value grade of C.
REGN stands above ILMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that REGN is the superior value option right now.
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Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report Illumina, Inc. (ILMN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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