Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Gilead Sciences (GILD) and Halozyme Therapeutics (HALO). 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.
Gilead Sciences and Halozyme Therapeutics are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that GILD likely has seen a stronger improvement to its earnings outlook than HALO has recently. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GILD currently has a forward P/E ratio of 11.89, while HALO has a forward P/E of 24.58. We also note that GILD has a PEG ratio of 0.76. 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. HALO currently has a PEG ratio of 0.79.
Another notable valuation metric for GILD is its P/B ratio of 5.02. 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, HALO has a P/B of 75.70.
Based on these metrics and many more, GILD holds a Value grade of A, while HALO has a Value grade of C.
GILD has seen stronger estimate revision activity and sports more attractive valuation metrics than HALO, so it seems like value investors will conclude that GILD is the superior 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