Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Pfizer (PFE - Free Report) and Novo Nordisk (NVO - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Pfizer has a Zacks Rank of #2 (Buy), while Novo Nordisk has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PFE has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
PFE currently has a forward P/E ratio of 14.66, while NVO has a forward P/E of 17.25. We also note that PFE has a PEG ratio of 2.22. 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. NVO currently has a PEG ratio of 2.29.
Another notable valuation metric for PFE is its P/B ratio of 3.72. 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, NVO has a P/B of 13.23.
These metrics, and several others, help PFE earn a Value grade of B, while NVO has been given a Value grade of C.
PFE sticks out from NVO in both our Zacks Rank and Style Scores models, so value investors will likely feel that PFE is the better option right now.