Investors looking for stocks in the Large Cap Pharmaceuticals sector might want to consider either Pfizer (PFE - Free Report) or 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.
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 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.
Right now, Pfizer is sporting a Zacks Rank of #2 (Buy), while Novo Nordisk has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PFE likely has seen a stronger improvement to its earnings outlook than NVO has recently. 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.
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.
PFE currently has a forward P/E ratio of 14.39, while NVO has a forward P/E of 17.52. We also note that PFE has a PEG ratio of 2.20. 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. NVO currently has a PEG ratio of 2.26.
Another notable valuation metric for PFE is its P/B ratio of 3.66. 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 13.43.
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.