Back to top

Image: Bigstock

GILD vs. ILMN: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors with an interest in Medical - Biomedical and Genetics stocks have likely encountered both Gilead Sciences (GILD - Free Report) and Illumina (ILMN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Gilead Sciences has a Zacks Rank of #1 (Strong Buy), while Illumina has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GILD 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 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 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.

GILD currently has a forward P/E ratio of 9.50, while ILMN has a forward P/E of 47.28. We also note that GILD has a PEG ratio of 0.76. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ILMN currently has a PEG ratio of 2.20.

Another notable valuation metric for GILD is its P/B ratio of 3.77. 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 11.41.

Based on these metrics and many more, GILD holds a Value grade of A, while ILMN has a Value grade of D.

GILD stands above ILMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GILD is the superior value option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Gilead Sciences, Inc. (GILD) - free report >>

Illumina, Inc. (ILMN) - free report >>

Published in