Investors with an interest in Medical - Generic Drugs stocks have likely encountered both Teva Pharmaceutical Industries Ltd. (TEVA - Free Report) and Akorn (AKRX - 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.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Teva Pharmaceutical Industries Ltd. has a Zacks Rank of #2 (Buy), while Akorn has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TEVA likely has seen a stronger improvement to its earnings outlook than AKRX has recently. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TEVA currently has a forward P/E ratio of 9.39, while AKRX has a forward P/E of 65.31. We also note that TEVA 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. AKRX currently has a PEG ratio of 2.84.
Another notable valuation metric for TEVA is its P/B ratio of 1.50. 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, AKRX has a P/B of 2.79.
Based on these metrics and many more, TEVA holds a Value grade of B, while AKRX has a Value grade of C.
TEVA has seen stronger estimate revision activity and sports more attractive valuation metrics than AKRX, so it seems like value investors will conclude that TEVA is the superior option right now.