Markets

LGND vs. ILMN: Which Stock Is the Better Value Option?

Investors with an interest in Medical - Biomedical and Genetics stocks have likely encountered both Ligand Pharmaceuticals (LGND) and Illumina (ILMN). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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, Ligand Pharmaceuticals is sporting a Zacks Rank of #2 (Buy), while Illumina has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LGND is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

LGND currently has a forward P/E ratio of 26.98, while ILMN has a forward P/E of 80.48. We also note that LGND has a PEG ratio of 1.80. 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. ILMN currently has a PEG ratio of 11.50.

Another notable valuation metric for LGND is its P/B ratio of 2.59. 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, ILMN has a P/B of 11.30.

Based on these metrics and many more, LGND holds a Value grade of B, while ILMN has a Value grade of D.

LGND 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 LGND is likely the superior value option right now.


Click to get this free report

Ligand Pharmaceuticals Incorporated (LGND): Free Stock Analysis Report

Illumina, Inc. (ILMN): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More