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Are Investors Undervaluing Jazz Pharmaceuticals (JAZZ) Right Now?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Jazz Pharmaceuticals (JAZZ - Free Report) is a stock many investors are watching right now. JAZZ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

JAZZ is also sporting a PEG ratio of 1.25. 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. JAZZ's industry has an average PEG of 3.63 right now. Over the last 12 months, JAZZ's PEG has been as high as 1.35 and as low as 0.60, with a median of 0.85.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. JAZZ has a P/S ratio of 3.5. This compares to its industry's average P/S of 5.73.

Finally, investors should note that JAZZ has a P/CF ratio of 7.91. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 20.81. Within the past 12 months, JAZZ's P/CF has been as high as 12.20 and as low as 7.28, with a median of 10.55.

Value investors will likely look at more than just these metrics, but the above data helps show that Jazz Pharmaceuticals is likely undervalued currently. And when considering the strength of its earnings outlook, JAZZ sticks out at as one of the market's strongest value stocks.


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