Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Alexion Pharmaceuticals and Cambrex . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Alexion Pharmaceuticals has a Zacks Rank of #2 (Buy), while Cambrex has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALXN has an improving earnings outlook. But this is only part of the picture for value investors.
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 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.
ALXN currently has a forward P/E ratio of 10.28, while CBM has a forward P/E of 27.29. We also note that ALXN has a PEG ratio of 0.92. 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. CBM currently has a PEG ratio of 2.73.
Another notable valuation metric for ALXN is its P/B ratio of 2.27. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CBM has a P/B of 2.97.
These metrics, and several others, help ALXN earn a Value grade of B, while CBM has been given a Value grade of C.
ALXN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ALXN is likely the superior value option right now.