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PFE vs. LLY: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Large Cap Pharmaceuticals sector have probably already heard of Pfizer (PFE - Free Report) and Eli Lilly (LLY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.

Pfizer and Eli Lilly are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PFE has an improving earnings outlook. However, value investors will care about much more than just this.

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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

PFE currently has a forward P/E ratio of 10.16, while LLY has a forward P/E of 30.12. We also note that PFE has a PEG ratio of 1.51. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. LLY currently has a PEG ratio of 1.85.

Another notable valuation metric for PFE is its P/B ratio of 3.30. 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, LLY has a P/B of 34.24.

These are just a few of the metrics contributing to PFE's Value grade of A and LLY's Value grade of C.

PFE has seen stronger estimate revision activity and sports more attractive valuation metrics than LLY, so it seems like value investors will conclude that PFE is the superior option right now.


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Pfizer Inc. (PFE) - free report >>

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