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NVS or LLY: Which Is the Better Value Stock Right Now?

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Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Novartis (NVS - 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Novartis is sporting a Zacks Rank of #2 (Buy), while Eli Lilly has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NVS 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 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 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.

NVS currently has a forward P/E ratio of 14.59, while LLY has a forward P/E of 49.07. We also note that NVS has a PEG ratio of 1.67. 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 1.97.

Another notable valuation metric for NVS is its P/B ratio of 5.85. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LLY has a P/B of 51.59.

Based on these metrics and many more, NVS holds a Value grade of B, while LLY has a Value grade of D.

NVS 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 NVS is likely the superior value option right now.


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