Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either Kamada (KMDA) or Acadia Pharmaceuticals (ACAD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Kamada is sporting a Zacks Rank of #2 (Buy), while Acadia Pharmaceuticals has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that KMDA has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
KMDA currently has a forward P/E ratio of 21.64, while ACAD has a forward P/E of 45.77. We also note that KMDA has a PEG ratio of 0.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ACAD currently has a PEG ratio of 4.87.
Another notable valuation metric for KMDA is its P/B ratio of 1.63. 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, ACAD has a P/B of 4.99.
These metrics, and several others, help KMDA earn a Value grade of A, while ACAD has been given a Value grade of C.
KMDA stands above ACAD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that KMDA is 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.
