Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Kamada (KMDA) 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Kamada has a Zacks Rank of #2 (Buy), while argenex SE has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KMDA is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
KMDA currently has a forward P/E ratio of 18.37, while ARGX has a forward P/E of 45.14. We also note that KMDA has a PEG ratio of 0.73. 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. ARGX currently has a PEG ratio of 0.83.
Another notable valuation metric for KMDA is its P/B ratio of 1.53. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ARGX has a P/B of 7.15.
These metrics, and several others, help KMDA earn a Value grade of A, while ARGX has been given a Value grade of C.
KMDA has seen stronger estimate revision activity and sports more attractive valuation metrics than ARGX, so it seems like value investors will conclude that KMDA is the superior option right now.
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Free: See Our Top Stock And 4 Runners UpKamada Ltd. (KMDA) : Free Stock Analysis Report
argenex SE (ARGX) : Free Stock Analysis Report
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.
