Investors with an interest in Medical - Generic Drugs stocks have likely encountered both Mallinckrodt (MNK - Free Report) and Amphastar Pharmaceuticals (AMPH - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Mallinckrodt has a Zacks Rank of #1 (Strong Buy), while Amphastar Pharmaceuticals has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MNK has an improving earnings outlook. But this is just one factor that value investors are interested in.
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 2.59, while AMPH has a forward P/E of 33.80. We also note that MNK has a PEG ratio of 0.22. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AMPH currently has a PEG ratio of 1.35.
Another notable valuation metric for MNK is its P/B ratio of 0.60. 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 3.23.
Based on these metrics and many more, MNK holds a Value grade of A, while AMPH has a Value grade of C.
MNK has seen stronger estimate revision activity and sports more attractive valuation metrics than AMPH, so it seems like value investors will conclude that MNK is the superior option right now.