Investors with an interest in Medical - Drugs stocks have likely encountered both Catalyst Pharmaceutical (CPRX) and United Therapeutics (UTHR). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Catalyst Pharmaceutical has a Zacks Rank of #1 (Strong Buy), while United Therapeutics has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CPRX likely has seen a stronger improvement to its earnings outlook than UTHR has recently. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
CPRX currently has a forward P/E ratio of 9.16, while UTHR has a forward P/E of 21.07. We also note that CPRX has a PEG ratio of 0.73. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. UTHR currently has a PEG ratio of 1.68.
Another notable valuation metric for CPRX is its P/B ratio of 3.38. 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, UTHR has a P/B of 3.57.
Based on these metrics and many more, CPRX holds a Value grade of B, while UTHR has a Value grade of C.
CPRX 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 CPRX is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
