Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Bristol-Myers Squibb (BMY - Free Report) and Novo Nordisk (NVO - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Bristol-Myers Squibb has a Zacks Rank of #1 (Strong Buy), while Novo Nordisk has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that BMY 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.
BMY currently has a forward P/E ratio of 10.98, while NVO has a forward P/E of 19.70. We also note that BMY has a PEG ratio of 2.14. 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 2.17.
Another notable valuation metric for BMY is its P/B ratio of 4.90. 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, NVO has a P/B of 16.26.
These are just a few of the metrics contributing to BMY's Value grade of B and NVO's Value grade of C.
BMY stands above NVO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BMY is the superior value option right now.