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 stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Both Celgene and Vertex Pharmaceuticals have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
CELG currently has a forward P/E ratio of 8.91, while VRTX has a forward P/E of 41. We also note that CELG has a PEG ratio of 0.40. 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. VRTX currently has a PEG ratio of 1.82.
Another notable valuation metric for CELG is its P/B ratio of 8.26. 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, VRTX has a P/B of 9.38.
Based on these metrics and many more, CELG holds a Value grade of B, while VRTX has a Value grade of D.
Both CELG and VRTX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CELG is the superior value 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.