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VRTX vs. ILMN: Which Stock Should Value Investors Buy Now?

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Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with Vertex Pharmaceuticals (VRTX - Free Report) and Illumina (ILMN - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Vertex Pharmaceuticals and Illumina are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VRTX 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

VRTX currently has a forward P/E ratio of 36.47, while ILMN has a forward P/E of 56.73. We also note that VRTX has a PEG ratio of 1.30. 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. ILMN currently has a PEG ratio of 5.16.

Another notable valuation metric for VRTX is its P/B ratio of 10.69. 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, ILMN has a P/B of 11.24.

These are just a few of the metrics contributing to VRTX's Value grade of B and ILMN's Value grade of D.

VRTX stands above ILMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VRTX is the superior value option right now.


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