Back to top

Image: Bigstock

ABBV vs. NVO: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with AbbVie (ABBV - Free Report) and Novo Nordisk (NVO - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, AbbVie is sporting a Zacks Rank of #2 (Buy), while Novo Nordisk has a Zacks Rank of #3 (Hold). This means that ABBV's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

ABBV currently has a forward P/E ratio of 9.14, while NVO has a forward P/E of 27.38. We also note that ABBV has a PEG ratio of 1.73. 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. NVO currently has a PEG ratio of 3.09.

Another notable valuation metric for ABBV is its P/B ratio of 14.81. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NVO has a P/B of 21.06.

These are just a few of the metrics contributing to ABBV's Value grade of B and NVO's Value grade of C.

ABBV sticks out from NVO in both our Zacks Rank and Style Scores models, so value investors will likely feel that ABBV is the better option right now.

See More Zacks Research for These Tickers

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

Novo Nordisk A/S (NVO) - free report >>

AbbVie Inc. (ABBV) - free report >>

Published in