Investors looking for stocks in the Large Cap Pharmaceuticals sector might want to consider either Sanofi (SNY) or Novo Nordisk (NVO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Sanofi is sporting a Zacks Rank of #2 (Buy), while Novo Nordisk 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 SNY 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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SNY currently has a forward P/E ratio of 9.80, while NVO has a forward P/E of 29.78. We also note that SNY has a PEG ratio of 1.02. 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. NVO currently has a PEG ratio of 1.80.
Another notable valuation metric for SNY is its P/B ratio of 1.35. 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, NVO has a P/B of 21.52.
These metrics, and several others, help SNY earn a Value grade of A, while NVO has been given a Value grade of C.
SNY has seen stronger estimate revision activity and sports more attractive valuation metrics than NVO, so it seems like value investors will conclude that SNY is the superior option right now.
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Sanofi (SNY) : Free Stock Analysis Report
Novo Nordisk AS (NVO) : Free Stock Analysis Report
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