Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either GSK (GSK) or Techne (TECH). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, GSK is sporting a Zacks Rank of #2 (Buy), while Techne has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GSK likely has seen a stronger improvement to its earnings outlook than TECH has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
GSK currently has a forward P/E ratio of 9.61, while TECH has a forward P/E of 39.56. We also note that GSK has a PEG ratio of 1.75. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TECH currently has a PEG ratio of 3.04.
Another notable valuation metric for GSK is its P/B ratio of 5.24. 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, TECH has a P/B of 6.53.
These are just a few of the metrics contributing to GSK's Value grade of A and TECH's Value grade of C.
GSK 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 GSK is likely the superior value option right now.
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