Investors interested in Medical - Biomedical and Genetics stocks are likely familiar with Incyte (INCY) and argenex SE (ARGX). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Incyte is sporting a Zacks Rank of #2 (Buy), while argenex SE has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that INCY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
INCY currently has a forward P/E ratio of 14.34, while ARGX has a forward P/E of 51.00. We also note that INCY has a PEG ratio of 0.57. 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. ARGX currently has a PEG ratio of 0.88.
Another notable valuation metric for INCY is its P/B ratio of 4.13. 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, ARGX has a P/B of 8.19.
Based on these metrics and many more, INCY holds a Value grade of B, while ARGX has a Value grade of C.
INCY has seen stronger estimate revision activity and sports more attractive valuation metrics than ARGX, so it seems like value investors will conclude that INCY is the superior 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.
