Investors looking for stocks in the Medical - Generic Drugs sector might want to consider either Mallinckrodt (MNK - Free Report) or Amphastar Pharmaceuticals (AMPH - 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Mallinckrodt has a Zacks Rank of #2 (Buy), while Amphastar Pharmaceuticals has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that MNK likely has seen a stronger improvement to its earnings outlook than AMPH has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
MNK currently has a forward P/E ratio of 4.36, while AMPH has a forward P/E of 66.99. We also note that MNK has a PEG ratio of 0.48. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AMPH currently has a PEG ratio of 2.98.
Another notable valuation metric for MNK is its P/B ratio of 0.37. 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, AMPH has a P/B of 2.80.
These are just a few of the metrics contributing to MNK's Value grade of A and AMPH's Value grade of D.
MNK stands above AMPH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that MNK is the superior value option right now.