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GSK vs. NVO: Which Stock Should Value Investors Buy Now?

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Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with GlaxoSmithKline (GSK - 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

GlaxoSmithKline and Novo Nordisk are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that GSK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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 13.56, while NVO has a forward P/E of 32.64. We also note that GSK has a PEG ratio of 2.35. 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 2.70.

Another notable valuation metric for GSK is its P/B ratio of 3.72. 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, NVO has a P/B of 23.95.

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

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


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