Investors with an interest in Medical - Generic Drugs stocks have likely encountered both Mallinckrodt (MNK) and Amphastar Pharmaceuticals (AMPH). But which of these two stocks presents investors with the better value opportunity right now? 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, Mallinckrodt has a Zacks Rank of #2 (Buy), while Amphastar Pharmaceuticals has a Zacks Rank of #4 (Sell). This means that MNK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
MNK currently has a forward P/E ratio of 2.92, while AMPH has a forward P/E of 33.84. We also note that MNK has a PEG ratio of 0.24. 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. AMPH currently has a PEG ratio of 1.35.
Another notable valuation metric for MNK is its P/B ratio of 0.28. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, AMPH has a P/B of 3.23.
Based on these metrics and many more, MNK holds a Value grade of A, while AMPH has a Value grade of C.
MNK sticks out from AMPH in both our Zacks Rank and Style Scores models, so value investors will likely feel that MNK is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Mallinckrodt public limited company (MNK): Get Free Report Amphastar Pharmaceuticals, Inc. (AMPH): Free Stock Analysis Report To read this article on Zacks.com click here.