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AZN vs. LLY: Which Stock Is the Better Value Option?
Investors interested in stocks from the Large Cap Pharmaceuticals sector have probably already heard of Astrazeneca (AZN - Free Report) and Eli Lilly (LLY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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.
Currently, Astrazeneca has a Zacks Rank of #2 (Buy), while Eli Lilly has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that AZN has an improving earnings outlook. But this is only part of the picture 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.
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.
AZN currently has a forward P/E ratio of 16.09, while LLY has a forward P/E of 39.02. We also note that AZN has a PEG ratio of 1.03. 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 2.01.
Another notable valuation metric for AZN is its P/B ratio of 4.59. 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, LLY has a P/B of 34.14.
These are just a few of the metrics contributing to AZN's Value grade of B and LLY's Value grade of C.
AZN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AZN is likely the superior value option right now.