Investors with an interest in Large Cap Pharmaceuticals stocks have likely encountered both Bristol-Myers Squibb (BMY - Free Report) and Astrazeneca (AZN - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Bristol-Myers Squibb and Astrazeneca are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BMY likely has seen a stronger improvement to its earnings outlook than AZN has recently. But this is just one factor that value investors are interested in.
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.
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.
BMY currently has a forward P/E ratio of 13.54, while AZN has a forward P/E of 23.38. We also note that BMY has a PEG ratio of 1.46. 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. AZN currently has a PEG ratio of 2.08.
Another notable valuation metric for BMY is its P/B ratio of 6.18. 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, AZN has a P/B of 6.92.
Based on these metrics and many more, BMY holds a Value grade of B, while AZN has a Value grade of C.
BMY has seen stronger estimate revision activity and sports more attractive valuation metrics than AZN, so it seems like value investors will conclude that BMY is the superior option right now.