CELG or VRTX: Which Is the Better Value Stock Right Now?
Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with Celgene (CELG) and Vertex Pharmaceuticals (VRTX). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Right now, Celgene is sporting a Zacks Rank of #1 (Strong Buy), while Vertex Pharmaceuticals has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CELG is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
CELG currently has a forward P/E ratio of 8.15, while VRTX has a forward P/E of 45.07. We also note that CELG has a PEG ratio of 0.37. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. VRTX currently has a PEG ratio of 2.
Another notable valuation metric for CELG is its P/B ratio of 9.95. 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, VRTX has a P/B of 10.51.
These metrics, and several others, help CELG earn a Value grade of B, while VRTX has been given a Value grade of F.
CELG has seen stronger estimate revision activity and sports more attractive valuation metrics than VRTX, so it seems like value investors will conclude that CELG is the superior option right now.
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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.