Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either Gilead Sciences (GILD) or Vertex Pharmaceuticals (VRTX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Gilead Sciences has a Zacks Rank of #2 (Buy), while Vertex Pharmaceuticals has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that GILD likely has seen a stronger improvement to its earnings outlook than VRTX 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.
GILD currently has a forward P/E ratio of 23.01, while VRTX has a forward P/E of 1,045.25. We also note that GILD has a PEG ratio of 3.11. 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. VRTX currently has a PEG ratio of 85.68.
Another notable valuation metric for GILD is its P/B ratio of 6.57. 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, VRTX has a P/B of 8.28.
These are just a few of the metrics contributing to GILD's Value grade of B and VRTX's Value grade of D.
GILD 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 GILD is likely the superior value option right now.
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Today, See These 5 Potential Home Runs >>Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
