Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Pfizer (PFE) and Eli Lilly (LLY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, Pfizer is sporting a Zacks Rank of #2 (Buy), while Eli Lilly has a Zacks Rank of #3 (Hold). This means that PFE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
PFE currently has a forward P/E ratio of 7.49, while LLY has a forward P/E of 36.75. We also note that PFE has a PEG ratio of 0.54. 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. LLY currently has a PEG ratio of 1.21.
Another notable valuation metric for PFE is its P/B ratio of 1.43. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LLY has a P/B of 55.17.
These are just a few of the metrics contributing to PFE's Value grade of A and LLY's Value grade of C.
PFE 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 PFE is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Pfizer Inc. (PFE): Free Stock Analysis Report Eli Lilly and Company (LLY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
