Investors with an interest in Medical - Drugs stocks have likely encountered both Amneal Pharmaceuticals (AMRX - Free Report) and Collegium Pharmaceutical (COLL - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Amneal Pharmaceuticals has a Zacks Rank of #2 (Buy), while Collegium Pharmaceutical has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that AMRX likely has seen a stronger improvement to its earnings outlook than COLL has recently. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
AMRX currently has a forward P/E ratio of 7.82, while COLL has a forward P/E of 13.80. We also note that AMRX has a PEG ratio of 0.31. 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. COLL currently has a PEG ratio of 0.69.
Another notable valuation metric for AMRX is its P/B ratio of 3.06. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, COLL has a P/B of 5.36.
These are just a few of the metrics contributing to AMRX's Value grade of A and COLL's Value grade of C.
AMRX sticks out from COLL in both our Zacks Rank and Style Scores models, so value investors will likely feel that AMRX is the better option right now.