Investors with an interest in Medical - Biomedical and Genetics stocks have likely encountered both GSK (GSK) and Vertex Pharmaceuticals (VRTX). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, GSK has a Zacks Rank of #2 (Buy), while Vertex Pharmaceuticals has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GSK likely has seen a stronger improvement to its earnings outlook than VRTX has recently. But this is just one factor that value investors are interested in.
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 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.
GSK currently has a forward P/E ratio of 9.38, while VRTX has a forward P/E of 23.29. We also note that GSK has a PEG ratio of 1.74. 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. VRTX currently has a PEG ratio of 2.10.
Another notable valuation metric for GSK is its P/B ratio of 4.69. 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, VRTX has a P/B of 5.49.
These are just a few of the metrics contributing to GSK's Value grade of A and VRTX's Value grade of C.
GSK sticks out from VRTX in both our Zacks Rank and Style Scores models, so value investors will likely feel that GSK is the better 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