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GSK vs. VRTX: Which Stock Is the Better Value Option?

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Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with GSK (GSK - Free Report) and Vertex Pharmaceuticals (VRTX - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, GSK is sporting a Zacks Rank of #1 (Strong Buy), while Vertex Pharmaceuticals has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GSK likely has seen a stronger improvement to its earnings outlook than VRTX has recently. 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 10.50, while VRTX has a forward P/E of 25.25. We also note that GSK has a PEG ratio of 1.94. 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. VRTX currently has a PEG ratio of 2.05.

Another notable valuation metric for GSK is its P/B ratio of 5.44. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, VRTX has a P/B of 6.22.

Based on these metrics and many more, GSK holds a Value grade of A, while VRTX has a Value grade of C.

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


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GSK PLC Sponsored ADR (GSK) - free report >>

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