INVA vs. MRK: Which Stock Is the Better Value Option?
Investors looking for stocks in the Large Cap Pharmaceuticals sector might want to consider either Innoviva (INVA) or Merck (MRK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Innoviva is sporting a Zacks Rank of #2 (Buy), while Merck has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that INVA is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
INVA currently has a forward P/E ratio of 9.12, while MRK has a forward P/E of 53.42. We also note that INVA has a PEG ratio of 3.04. 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. MRK currently has a PEG ratio of 6.42.
Another notable valuation metric for INVA is its P/B ratio of 1.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MRK has a P/B of 8.4.
These are just a few of the metrics contributing to INVA's Value grade of A and MRK's Value grade of C.
INVA stands above MRK thanks to its solid earnings outlook, and based on these valuation figures, we also feel that INVA is the superior value option right now.
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See Stocks Now >>Innoviva, Inc. (INVA) : Free Stock Analysis Report
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
