Investors interested in stocks from the Medical - Drugs sector have probably already heard of Catalyst Pharmaceutical (CPRX) and United Therapeutics (UTHR). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies 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 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.
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 8.28, while UTHR has a forward P/E of 19.72. We also note that CPRX has a PEG ratio of 0.66. 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. UTHR currently has a PEG ratio of 1.94.
Another notable valuation metric for CPRX is its P/B ratio of 3.01. 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, UTHR has a P/B of 3.28.
These are just a few of the metrics contributing to CPRX's Value grade of A and UTHR's 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.
